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Why Is Cabot (CBT) Down 2.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Cabot (CBT - Free Report) . Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cabot due for a breakout? 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 Surpasses Earnings and Sales Estimates in Q4

Cabot slipped to a loss of $272 million or $4.81 per share in the fourth quarter of fiscal 2020 (ended Sep 30, 2020) from a profit of $33 million or 55 cents per share in the year-ago quarter.

Barring one-time items, adjusted earnings per share were 68 cents in the reported quarter, down from $1.05 in the year-ago quarter. The figure topped the Zacks Consensus Estimate of 58 cents.

Net sales fell 20% year over year to $659 million in the quarter. It, however, beat the Zacks Consensus Estimate of $655.6 million. The company saw a rebound in volumes in its Reinforcement Materials segment on a sequential comparison basis in the quarter.

Fiscal 2020 Results

Adjusted earnings for fiscal 2020 were $2.08 per share, down from $3.91 a year ago. Net sales were down roughly 22% year over year to $2,614 million.

Segment Highlights

Reinforcement Materials’ sales fell 28% year over year to $325 million in the reported quarter. Earnings before interest and tax (EBIT) in the segment were $59 million, down from $71 million in the year-ago quarter, impacted by lower year over year volumes. However, the company saw sequential improvement in demand in the segment as customers beefed up their production levels.

Sales in Performance Chemicals unit went down around 13% year over year to $226 million in the reported quarter. EBIT fell 39% year over year to $25 million mainly due to less favorable product mix in specialty carbons and fumed metal oxides product lines as well as a competitive pricing environment in the fumed metal oxides.

Sales in Purification Solutions declined 1% year over year to $67 million in the quarter. EBIT fell by $3 million year over year due to reduced inventory levels.

Financial Position

Cabot had cash and cash equivalents of $151 million at the end of fiscal 2020, down around 11% year over year. The company’s long-term debt rose 7% year over year to $1,094 million.

Cash flow from operating activities was $377 million for fiscal 2020, up 4% year over year.

Outlook

Cabot said that it is encouraged by the pace of recovery in automotive and tire markets as it enters fiscal 2021. The company expects EBIT to improve both sequential and year-over-year basis in the first quarter of fiscal 2021. It also sees adjusted earnings per share for the first quarter to be between 80 cents and 90 cents.

The company envisions the Reinforcement Materials unit to benefit from improved margins, especially in Asia. It also expects the Performance Chemicals segment to gain in both volumes and product mix from a strengthening automotive market.
 

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.


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