A month has gone by since the last earnings report for Cabot (CBT Quick QuoteCBT - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cabot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cabot Misses Earnings and Sales Estimates in Q3

Cabot 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 a penny.

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.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.31% due to these changes.

VGM Scores

At this time, Cabot has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cabot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.