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Cabot (CBT) Earnings and Revenues Trump Estimates in Q3

Zacks Equity Research
Updated

Cabot Corporation CBT recorded net profit of $88 million or $1.40 per share in the third quarter of fiscal 2018 (ended Jun 30, 2018) compared with net profit of $47 million or 73 cents a year ago.

Barring one-time items, adjusted earnings per share in the reported quarter were $1.06 (up from 83 cents a year ago), which surpassed the Zacks Consensus Estimate of $1.03.

Net sales increased around 21.1% year over year to $854 million in the quarter. The figure also outpaced the Zacks Consensus Estimate of $831 million.

Cabot Corporation Price, Consensus and EPS Surprise

 

Cabot Corporation Price, Consensus and EPS Surprise | Cabot Corporation Quote

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Segment Highlights

Reinforcement Materials sales increased 26.9% year over year to $466 million in the fiscal third quarter while EBIT for the segment jumped 45% mainly on strong volume growth and expansion of unit margins in Asia along with improved pricing and product mix from customer agreements.

Sales at Performance Chemicals rose almost 19.6% year over year to $274 million in the quarter and EBIT increased 21.7% mainly on pricing and volume growth on strong commercial execution.

Sales at Purification Solutions edged down to $70 million from $71 million in the year-ago quarter. Lower volumes and margins due to continuing competition in mercury removal applications, partly offset by lower fixed cost, affected profitability of the segment.

Sales at the Specialty Fluids segment were flat year over year at $12 million. However, EBIT at the segment declined 25% year over year due to mix of business compared to the prior year.

Financial Position

Cabot ended the fiscal third quarter with cash and cash equivalents of $131 million, down from $198 million a year ago.

The company’s long-term debt contracted 5.2% year over year to $630 million as of Jun 30, 2018.

Cash provided by operating activities was around $62 million in the reported quarter.

Outlook

Cabot expects the Reinforcement Materials segment to continue performing strongly in the fourth quarter on the back of solid operational and commercial execution. For the Performance Chemicals segment, it expects to maintain margins while driving volume growth in specialty Carbons and Formulations. However, volumes and fixed cost in Metal Oxide may be impacted by turnarounds of two fumed silica feedstock provider.  

The company expects competitive pressure to impact results at the Purification Solutions segment. However, it anticipates higher seasonal volumes in the fourth quarter. For the Specialty Fluids segment, it expects continued ramp up of drilling activity on recent projects to boost results in the fourth quarter.  

Price Performance

Shares of Cabot have gained 11.8% in the past three months against the industry’s 3.1% drop.

Zacks Rank & Stocks to Consider

Cabot currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks worth considering in the basic materials space are Celanese Corporation CE, BHP Billiton Limited BHP and Steel Dynamics Inc. STLD.
 
Celanese has an expected long-term earnings growth rate of 10% and a Zacks Rank #1 (Strong Buy). The company’s shares have moved up 18.4% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
BHP Billiton has an expected long-term earnings growth rate of 5.3% and a Zacks Rank #1. Its shares have rallied roughly 20.2% in a year’s time.
 
Steel Dynamics has an expected long-term earnings growth rate of 12% and a Zacks Rank #2 (Buy). The stock has gained 23.2% in the past year.

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