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Will Cabot Corp. (CBT) Disappoint Estimates in Q3 Earnings?
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Specialty chemicals and performance materials producer, Cabot Corp. (CBT - Free Report) , is set to release third-quarter fiscal 2016 results after the market closes on July 27.
Last quarter, the company delivered a negative earnings surprise of 9.09%. The company reported adjusted earnings of 70 cents per share that fell short of the Zacks Consensus Estimate of 77 cents. Net sales of $568 million tumbled 18.2% year over year. However, cost reductions led to an improvement in operating profits and earnings compared to the second quarter of fiscal 2015.
The company has missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 1.59%. Let’s see how things are shaping up for this announcement.
Factors to Consider
In second-quarter fiscal 2016, Cabot Corp. performed relatively well with its adjusted earnings per share surging 32.1% year over year. The increase was primarily driven by cost reduction as a result of restructuring measures undertaken by the company. Management expects a better performance in the second half of fiscal 2016 compared to the first half, with higher volumes across all segments.
At the beginning of fiscal 2016, the company had targeted a 75 cents increase in annual adjusted earnings per share over last year. However, the company does not expect to achieve this target now given a challenging operating environment. It sees earnings per share for fiscal 2016 in the range of $3.05−$3.23. While the company is on track with cost reduction through restructuring, several other factors can weigh on earnings.
Cabot Corp. continues to face a number of macroeconomic challenges. The company’s Specialty Fluids segment is dependent on the timing of certain oil and gas projects. The segment’s EBIT decreased by $1 million year over year in the second quarter of fiscal 2016. The segment continues to be affected by low momentum and project activity caused by a downturn in the oil and gas industry.
The Purification Solutions segment of Cabot Corp. saw a $3 million year-on-year decrease in EBIT in second-quarter fiscal 2016 due to an adverse impact of reduced inventory levels. Low natural gas prices are expected to have a more pronounced impact on the segment, going forward.
The company’s Reinforcement Segment saw volumes fall by 1% year over year in the last reported quarter. This was primarily caused by weaker demand in Latin America, partially offset by higher demand in North America and Asia. Although the segment is expected to grow in North America and Europe, it continues to face stiff competitive pressure in China and South America. While management is optimistic about the coming quarters, uncertainty or unfavorable movement in feedstock costs, natural gas prices, volume and currencies can create pressure on the projections.
Our proven model does not conclusively show that Cabot Corp. is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Cabot Corp. is currently pegged at -3.26%. This is because the Most Accurate Estimate stands at 89 cents while the Zacks Consensus Estimate is pegged at 92 cents.
Zacks Rank: Cabot Corp. carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Huntsman Corp. (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1 (Strong Buy).
FMC Corp. (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2 (Buy).
Ingevity Corp. (NGVT - Free Report) has an Earnings ESP of +3.92% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Will Cabot Corp. (CBT) Disappoint Estimates in Q3 Earnings?
Specialty chemicals and performance materials producer, Cabot Corp. (CBT - Free Report) , is set to release third-quarter fiscal 2016 results after the market closes on July 27.
Last quarter, the company delivered a negative earnings surprise of 9.09%. The company reported adjusted earnings of 70 cents per share that fell short of the Zacks Consensus Estimate of 77 cents. Net sales of $568 million tumbled 18.2% year over year. However, cost reductions led to an improvement in operating profits and earnings compared to the second quarter of fiscal 2015.
The company has missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 1.59%. Let’s see how things are shaping up for this announcement.
Factors to Consider
In second-quarter fiscal 2016, Cabot Corp. performed relatively well with its adjusted earnings per share surging 32.1% year over year. The increase was primarily driven by cost reduction as a result of restructuring measures undertaken by the company. Management expects a better performance in the second half of fiscal 2016 compared to the first half, with higher volumes across all segments.
At the beginning of fiscal 2016, the company had targeted a 75 cents increase in annual adjusted earnings per share over last year. However, the company does not expect to achieve this target now given a challenging operating environment. It sees earnings per share for fiscal 2016 in the range of $3.05−$3.23. While the company is on track with cost reduction through restructuring, several other factors can weigh on earnings.
Cabot Corp. continues to face a number of macroeconomic challenges. The company’s Specialty Fluids segment is dependent on the timing of certain oil and gas projects. The segment’s EBIT decreased by $1 million year over year in the second quarter of fiscal 2016. The segment continues to be affected by low momentum and project activity caused by a downturn in the oil and gas industry.
The Purification Solutions segment of Cabot Corp. saw a $3 million year-on-year decrease in EBIT in second-quarter fiscal 2016 due to an adverse impact of reduced inventory levels. Low natural gas prices are expected to have a more pronounced impact on the segment, going forward.
The company’s Reinforcement Segment saw volumes fall by 1% year over year in the last reported quarter. This was primarily caused by weaker demand in Latin America, partially offset by higher demand in North America and Asia. Although the segment is expected to grow in North America and Europe, it continues to face stiff competitive pressure in China and South America. While management is optimistic about the coming quarters, uncertainty or unfavorable movement in feedstock costs, natural gas prices, volume and currencies can create pressure on the projections.
CABOT CORP Price and EPS Surprise
CABOT CORP Price and EPS Surprise | CABOT CORP Quote
Earnings Whispers
Our proven model does not conclusively show that Cabot Corp. is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Cabot Corp. is currently pegged at -3.26%. This is because the Most Accurate Estimate stands at 89 cents while the Zacks Consensus Estimate is pegged at 92 cents.
Zacks Rank: Cabot Corp. carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Huntsman Corp. (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1 (Strong Buy).
FMC Corp. (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2 (Buy).
Ingevity Corp. (NGVT - Free Report) has an Earnings ESP of +3.92% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>