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Make it 2 in a row for Cabot Corporation (CBT - Snapshot Report). This Zacks #1 Rank (strong buy) recently reported its second consecutive record quarter as demand for specialty chemicals remains hot. Cabot is a value stock, with a forward P/E of just 10.

Cabot Corporation manufactures performance materials including rubber and specialty grade carbon blacks, inkjet colorants, fumed metal oxides, and cesium formate drilling fluids.

Founded in 1882, the Boston-based company has a global reach, operating 39 manufacturing facilities in 20 countries.

Cabot Surprised By 17% in the Fiscal Third Quarter

On July 26, Cabot reported its fiscal third quarter results and beat the Zacks Consensus Estimate by 15 cents. It has surprised 8 out of the last 9 quarters with the 9th quarter being a "meet."

Earnings per share were $1.04 compared to the consensus of 89 cents. It made 95 cents in the year ago quarter.

Sales jumped 17.2% to $883 million from $753 million in the third quarter of last year.

Its New Business segment had record sales in the quarter, primarily due to a strong Inkjet Colorants Business. Rubber Blacks also had another strong quarter while the Performance segment saw volume growth.

What Slowdown?

As of July, Cabot was still optimistic about the rest of the fiscal year.

"We continue to see solid demand in our end markets," said Patrick Prevost, CEO.

"The tire and automotive sectors are returning to their long-term regional growth rates and the foreseeable demand should ensure ongoing high utilization rates of our assets. There continues to be strong demand growth for high performance electronics, such as smartphones and tablets that will benefit our Supermetals business," he added.

Emerging markets also continue to be a strong driver of demand in several of its segments.

Fiscal 2011 Zacks Consensus Estimate Jumps

Given the earnings beat, the analysts raised fiscal 2011 estimates. The 2011 Zacks Consensus Estimate climbed to $3.41 from $3.27 per share in the last 30 days. 1 estimate also moved higher in the prior 7 days.

That is earnings growth of 12.1% compared with fiscal 2010.

Sell Off Creates an Opportunity

Shares started to weaken earlier this summer from their 2-year high before plunging during the recent market turmoil.

The valuations, therefore, have gotten even more attractive.

In addition to a P/E of just 10, which is below its peers which average 12.4, the company has a price-to-book ratio of only 1.4. That is also below its peers, which average a P/B ratio of 2.6. A P/B ratio under 3.0 usually indicates "value."

Cabot also has a price-to-sales ratio of 0.7. This is another indicator of value because a P/S ratio under 1.0 usually indicates a company is undervalued.

Additionally, Cabot rewards shareholders with a dividend, which is currently yielding 2.2%.

Cabot is not seeing a slowdown in its specialty chemicals business. Not yet. With estimates rising, it remains an attractive value stock.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at

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