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Cabot (CBT) Misses Earnings and Sales Estimates in Q3

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Cabot Corporation (CBT - Free Report) slipped to a loss of $6 million or 12 cents per share in the third quarter of fiscal 2020 (ended Jun 30, 2020) from a profit of $32 million or 55 cents per share in the year-ago quarter.

Barring one-time items, adjusted loss per share was 7 cents in the reported quarter against adjusted earnings of a penny per share in the year-ago quarter. Also, the figure trailed the Zacks Consensus Estimate of 1 cent.

Net sales fell 38.7% year over year to $518 million in the quarter. It also lagged the Zacks Consensus Estimate of $589.9 million.

Cabot Corporation Price, Consensus and EPS Surprise

Cabot Corporation Price, Consensus and EPS Surprise

Cabot Corporation price-consensus-eps-surprise-chart | Cabot Corporation Quote

Segment Highlights

Reinforcement Materials’ sales fell 57.3% year over year to $197 million in the reported quarter. Earnings before interest and tax (EBIT) in the segment were at a loss of $5 million against earnings of $72 million in the year-ago quarter.

Sales in Performance Chemicals unit went down 12.4% year over year to $220 million in the reported quarter. EBIT fell 43.2% year over year to $21 million mainly due to lower volumes stemming from the coronavirus pandemic, an unfavorable product mix in specialty carbons as well as competitive pricing environment in the fumed metal oxides product line.

Sales in Purification Solutions declined 13.7% year over year to $63 million in the quarter. EBIT rose 100% year over year to $2 million on higher margins from better pricing and lower fixed costs.

Financial Position

Cabot had cash and cash equivalents of $162 million at the end of the fiscal third quarter, down 10.2% year over year. The company’s long-term debt rose 14.5% year over year to $1,164 million.

Cash flow from operating activities was $149 million in the reported quarter, up 29.6% year over year.  

Outlook

Cabot expects volume and EBIT to improve significantly in the fiscal fourth quarter compared with fiscal third-quarter levels on the back of higher demand on improving economic outlook and recovery in automotive and replacement tire markets.

The company expects a substantial sequential improvement in demand in Reinforcement Materials as customer facilities resume in Europe and the Americas. In Performance Chemicals, it expects a modest improvement in volumes and product mix, which is likely to be offset by higher fixed costs.

Price Performance

Shares of Cabot have inched up 1.2% in the past year compared with the industry’s 0.6% rise.

Zacks Rank & Key Picks

Cabot currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space include Equinox Gold Corp. (EQX - Free Report) , Alamos Gold Inc. (AGI - Free Report) and Northern Dynasty Minerals Ltd. (NAK - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Equinox Gold has an expected earnings growth rate of 255.2% for 2020. The company’s shares have surged 106.3% in the past year.

Alamos Gold has an expected earnings growth rate of 90% for 2020. Its shares have returned 43.1% in the past year.

Northern Dynasty has an expected earnings growth rate of 35.7% for 2020. The company’s shares have gained 108.2% in the past year.

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