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Cabot (CBT) to Divest Purification Solutions Unit for $111M

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Cabot Corporation (CBT - Free Report) recently entered into an agreement to sell its Purification Solutions business to One Equity Partners, a middle-market private equity firm. The transaction, valued at $111 million and expected to close in the second quarter of fiscal 2022, is subject to customary closing conditions and applicable works council consultations.

Cabot’s Purification Solutions business is a renowned player in the research, development, manufacturing, and sale of high-performing activated carbon used in a range of environmental, health, safety, and industrial applications.

The company expects to recognize a pre-tax impairment charge in the range of $155-$165 million in the first quarter of fiscal 2022 in relation to the sale, with net cash proceeds from the transaction expected to be roughly $80 million.

While Credit Suisse is acting as the financial advisor, K&L Gates is giving legal counsel to Cabot for the transaction.

Cabot is enthusiastic about the deal as One Equity Partners has a proven track record of advancing market-leading industrial companies. The transaction will allow the company to channel its resources on its core business segments and invest in units with strong future growth and innovation potential, such as Battery Materials.

Cabot’s shares have risen 31% over the past year, outperforming the 15.2% rise of the industry.

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In the fourth quarter of fiscal 2021, Cabot reported adjusted earnings of $1.11 per share, topping the Zacks Consensus Estimate of $1.02. Revenues were $904 million in the quarter, which jumped 37.2% year over year but missed the Zacks Consensus Estimate of $924.5 million.

In its fourth-quarter earnings call, Cabot stated that it expects continued strong end-market demand and benefits from growth investments. It expects to benefit from higher volumes driven by strong forecasted levels of tire production and higher pricing in the Reinforcement Materials segment. In the Performance Chemicals segment, Cabot projects continued demand growth across its broad set of applications, with particular strength in battery materials and inkjet packaging.

The company also expects challenges such as rising input costs, global supply-chain disruptions and the semiconductor chip shortage to moderate through the next fiscal year. The company expects adjusted earnings per share for fiscal 2022 in the range of $5.20-$5.60.

Zacks Rank & Key Picks

Cabot currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks from the basic materials space include Univar Solutions Inc. (UNVR - Free Report) and AdvanSix Inc. (ASIX - Free Report) sporting a Zacks Rank #1 (Strong Buy), and Celanese Corp. (CE - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar has an expected earnings growth rate of 55.2% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 9% upward over the past 60 days.

Univar beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with an earnings surprise of 24.1%, on average. UNVR’s shares have rallied 50.5% over a year.

AdvanSix has an expected earnings growth rate of 197% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 14.1% upward over the last 60 days.

AdvanSix beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with an earnings surprise of 47%, on average. ASIX’s shares have also surged 157.4% over a year.

Celanese has an expected earnings growth rate of 139.7% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 9.1% upward over the last 60 days.

Celanese beat the Zacks Consensus Estimate for earnings in the four trailing quarters and pulled off an earnings surprise of 12.7%, on average. Shares of CE have rallied around 22.6% over a year.


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