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Cabot Corporation

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Cabot Corporation (CBT - Free Report) has made it six earnings beats in a row. Will it make it 7 at the end of July? This Zacks #1 Rank (strong buy) is a value stock with a forward P/E of 12.2.

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 Acquiring Norit N.V.

On Jun 21, Cabot announced it had entered into an agreement to buy Dutch-based Norit N.V. for $1.1 billion. Norit is a carbon manufacturer with 10 facilities throughout the Americas and Europe employing 760 people. It generated sales of $360 million in 2011.

Cabot is financing the acquisition with $200 million in cash and $300 million in borrowings under its existing revolver. It will also issue about $600 million in long-term debt prior to closing.

Cabot expects the deal to be accretive to earnings in the range of 20 to 25 cents in fiscal 2013 and 30 to 40 cents in fiscal 2014.

It is expected to close within calendar year 2012.

Cabot Raised Dividend 11%

On May 11, Cabot announced it was raising its dividend 11%, or 2 cents, to 20 cents a share.

It was payable on June 15. The dividend is currently yielding 1.9%.

Cabot Beat Again in Fiscal Q2

On May 1, Cabot reported its fiscal second quarter results and surprised by 21%. Earnings were 96 cents compared to the Zacks Consensus of 79 cents. That continued its strong earnings surprise track record which now stands at 6 quarters.

Sales rose 14% to $844 million from $739 million in the year ago quarter boosted by its Rubber Blacks Business and Specialty Fluids Segment.

It saw stronger sequential volumes and had a favorable product mix in the quarter.

Outlook for Fiscal 2012

In May, it was optimistic about improving conditions in North America and China. It also saw the continuation of attractive growth in the emerging economies in Asia and South America.

Europe, however, remained a challenge.

It expects to continue to grow earnings through margin and capacity expansion as well as new product development.

The 2012 Zacks Consensus Estimate Rises

Within the last 60 days, the 2012 Zacks Consensus Estimate has moved to $3.35 from $3.32. 1 estimate was revised higher in the last 30 days.

This is earnings growth of 11.7% as the company made $3.00 in fiscal 2011.

Analysts expect bigger growth in fiscal 2013 of 20% but that's likely due to the recent announcement of the Norit acquisition.

Still A Value

I've written about Cabot as a value stock several times over the last few years.

Shares really got hammered in the panic of 2011 but, so far, in 2012, they've avoided the same investor jitters.

But Cabot still has value.

In addition to a P/E under 15, which is my cut-off for value stocks, it also has a price-to-book ratio of 1.4. A P/B ratio under 3.0 usually means there is value.

The company has other value characteristics as well, including a price-to-sales ratio of 0.8. A P/S ratio under 1.0 can indicate value.

Will the story still sound as good in the fiscal third quarter? Or will Europe become even more challenging?

Cabot is scheduled to report third quarter results on July 31. Stay tuned.

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 on twitter at @TraceyRyniec.

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