The main theme of last year's third-quarter earnings season was the economic recovery and hopes of an effective and widely distributed COVID-19 vaccine. This year, supply chain challenges, rising raw material costs, and a labor shortage are some of the major topics discussed by leading industrial companies.

Even large and well-run companies are facing shrinking margins and slowing growth. However, there are a few standouts that have risen to the challenge. United Parcel Service (UPS 1.46%), Essential Utilities (WTRG 1.91%), and Axalta Coating Systems (AXTA 0.49%) are three companies that are doing an impressive job navigating the economic headwinds. Here's what makes each of these value stocks a great buy now.

A technical specialist works with an industrial CNC machine.

Image source: Getty Images.

The best in its business

Daniel Foelber (UPS): In September, FedEx (FDX 1.68%) missed big on earnings and lowered its fiscal year (FY) 2022 guidance due to labor market uncertainty and supply chain issues. In late October, UPS reported its best Q3 in company history and raised its full-year 2021 guidance and operating margin. Even more impressive, UPS is generating strong results and expects to finish the year spending just $4.2 billion in capital expenditures, which is significantly lower than in years past. 

UPS Revenue (TTM) Chart

UPS Revenue (TTM) data by YCharts

Given the similarities between FedEx and UPS, it may seem odd that one company is struggling while the other is thriving. However, a closer look shows that UPS was better prepared than FedEx in making sure it could deliver this holiday season.

For example, FedEx said it will struggle to hire 90,000 additional workers needed to satisfy peak demand but UPS thinks it will deliver record-high consolidated operating profit and expand margins in the fourth quarter. "On the labor front, we've digitized and simplified our job application process, enabling qualified applicants to receive a job offer within 30 minutes of applying. In parts of the country, labor costs are higher than they were last year, but we are effectively managing through that cost pressure," said UPS CEO Carol Tomé on the company's Q3 2021 earnings call.

UPS didn't shy away from supply chain challenges, saying there are "capacity, congestion, and cost concerns."

"In the U.S., we project a robust peak season, and through our planning efforts, we believe we are well on our way to deliver a peak that will be a win for UPS shippers, recipients, and shareowners," said Tomé. 

In sum, UPS just delivered a record third quarter, is projecting a record fourth quarter, and is likely to report its highest annual revenue, net income, and free cash flow in its history, and that's coming off of an incredible 2020. Hovering around an all-time high, UPS may not seem like a value stock. But given the company's impressive track record for top- and bottom-line growth, strong balance sheet, growing dividend, and leadership in e-commerce, UPS really is the complete package.

Come on in... the water's fine

Scott Levine (Essential Utilities): Are images of idle cargo ships at the Port of Los Angeles and news of worker strikes at factories leaving you tossing and turning at night? You're not alone. Many investors, consequently, are looking for defensive strategies to protect their portfolios from the headwinds presented by supply chain bottlenecks and labor concerns. There may be a variety of approaches to consider, but one that I'm keen on at the moment is Essential Utilities, a regulated water utility that serves more than 3 million customers in eight states.

Listen to conference calls accompanying quarterly earnings reports this week and you'll no doubt hear plenty of references to financial challenges wrought by the supply chain -- that is, unless you're listening to the Q3 2021 conference call from Essential Utilities. Not once did management reference the supply chain as a factor impeding the company's financial wellbeing. In fact, the company reiterated 2021 earnings per share guidance of about $1.67, which will mark a company record if Essential Utilities achieves it. Moreover, management maintained its five-year guidance of growing EPS at a compound annual rate of 5% to 7% from $1.47 in 2019 through 2023.

Operating as a regulated utility, Essential Utilities can't raise prices whenever it desires; instead, the company largely relies on growth through acquisition -- a strategy that it continues to execute. In 2021, for example, Essential Utilities has added more than 7,400 water and wastewater customers through acquisitions, and it plans on adding about 234,000 more customers through pending transactions. 

Trading at 28.8 times earnings, Essential Utilities may not immediately seem like a stock on the discount rack, but dig a little deeper and you'll find that shares are more attractively priced than you may have first thought. For one, the stock's current price-to-earnings ratio represents a discount to its five-year average earnings multiple of 34.6. Plus, shares are currently changing hands at about 17.9 times operating cash flow -- lower than their five-year average multiple of 19.9. When you take all this into account, it becomes apparent that Essential Utilities is a bargain stock offering a way to fortify your portfolio against the supply chain and labor headwinds plaguing so many businesses across disparate industries right now.

Strong growth ahead as end markets normalize

Lee Samaha (Axalta Coating Systems): Now, I know what you are thinking, and you would be right: What could be attractive about a coatings company with heavy exposure to rising commodity prices and a faltering automobile production market? Indeed, Axalta and its paintings and coatings peers all warned of sales shortfalls before they reported their recent third-quarter earnings.

But here's the thing. Stock prices have no memory, and investors usually buy shares with their future earnings expectations in mind. In this context, Axalta is an excellent value stock. Despite all the headwinds, the stock trades on just 18.3 times expected 2021 earnings. However, Wall Street analysts have earnings per share growing 22% in 2022 to $2.17, putting the stock on a forward price-to-earnings ratio of just 14.8 times 2022 earnings.

There's a good reason for optimism. Axalta's sales to the auto production market will bounce back as the industry works through the semiconductor shortage. Meanwhile, an improving economy will boost industrial coatings sales, and the improvement in miles driven will result in a pickup in Axalta's refinish sales.

Finally, history suggests that commodity price growth will moderate, and the supply chain issues hounding the global economy are likely to diminish as the world gets back to work. So there's plenty of upside potential for the company as it eyes a better 2022.