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Cabot Corporation (CBT - Snapshot Report) carried its strong earnings momentum into the second quarter and delivered its 6th consecutive positive earnings surprise. Analysts have continued to raise their earnings estimates for both 2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy) stock.

The company also recently raised its quarterly dividend for the first time since 2006. It currently yields 2.2%.

Specialty Chemicals & Performance Materials

Cabot Corp. is a specialty chemicals and performance materials company. Some of its major products include: carbon black, fumed silica, cesium formate drilling fluids, inkjet colorants and aerogels.

Cabot was founded in 1882 and is headquartered in Boston. It has a market cap of $2.4 billion.

Second Quarter Results

Cabot reported better than expected results for its second quarter on May 1. Earnings per share came in at 96 cents, beating the Zacks Consensus Estimate of 79 cents. It was a 68% increase over the same quarter last year.

Net sales rose 14% to $844 million, ahead of the consensus of $809 million. In the company's Core Segment - Rubber Blacks (which accounted for 63% of net sales), revenue was up 17%.

The Rubber Blacks segment and Specialty Fluids segment set new records of quarterly operating income performance. Overall, operating income soared 61% year-over-year.

Outlook

Management provided a positive outlook for the remainder of 2012 in its second quarter earnings release. The company stated that it was "optimistic about the improving conditions in North America and China" and sees "attractive growth in the emerging economies of Asia and South America, both in the short and long-term."

Management did caution that the European macroeconomic environment was "challenging", but it reiterated its long-term target of $4.50 in EPS by 2014 while mainating return on invested capital of over 13%.

Estimates Rising

This bullish guidance prompted analysts to revise their estimates significantly higher for both 2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy) stock.

The Zacks Consensus Estimate for 2012 is now $3.34, representing 11% growth over 2011 EPS. The 2013 consensus is currently $3.90, corresponding with 17% growth.

Dividend Rising

On May 11, Cabot announced an 11% increase in its quarterly dividend to 20 cents. This equates to a yield of 2.2%.

This marked the company's first dividend increase since 2006.

Reasonable Valuation

Valuation looks very reasonable with shares trading at just 10.3x 12-month forward earnings, a discount to its 10-year median of 14.7x.

And its price to book ratio of 1.3 is well below the peer group multiple of 2.6.

The Bottom Line

With rising estimates, strong growth projections, a solid 2.2% yield and attractive valuation, Cabot offers investors a lot to like.

Read the February 13 article here.

This Week's Growth & Income Zacks Rank Buy Stocks:

PPG Industries (PPG) recently delivered its 7th consecutive quarter of record earnings, prompting a flurry of positive estimate revisions from analysts. It is a Zacks #1 Rank (Strong Buy) stock. The company also pays a dividend that yields a solid 2.3%. It has paid a remarkable 455 consecutive quarterly dividend payments. Read the full article.

Monsanto (MON) has topped the Zacks Consensus Estimate in each of the last six quarters. It also pays a dividend that yields a solid 1.6%. Read the full article.

Lithia Motors (LAD) has topped the Zacks Consensus Estimate in each of the last seven quarters, with an average beat of 47% over that time. It also pays a dividend that yields 1.7%. Read the full article.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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