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Here's What Makes Cabot (CBT) Stock a Solid Choice Right Now

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Cabot Corporation’s (CBT - Free Report) stock looks promising at the moment. It is benefiting from its growth actions and strong demand across regions and end markets. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Let’s take a look into the factors that make this Zacks Rank #1 (Strong Buy) stock an attractive choice for investors right now.

An Outperformer

Shares of Cabot are up 28.6% year to date against the 7.4% decline of its industry. It has also outperformed the S&P 500’s roughly 14.2% decline over the same period.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Estimates Moving Up

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for Cabot for fiscal 2022 has increased around 3.4%. The consensus estimate for fiscal 2023 has also been revised 6.9% upward over the same time frame.

Positive Earnings Surprise History

Cabot has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 16.2%, on average.

Healthy Growth Prospects

The Zacks Consensus Estimate for earnings for the current fiscal for Cabot is currently pegged at $6.00, reflecting an expected year-over-year growth of 19.5%. Earnings are also expected to register a 13.6% growth in fiscal 2023.

Superior Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Cabot is 29.9%, above the industry’s level of 25.9%.

Growth Drivers in Place

Cabot is well placed gain from a recovery in demand from the pandemic-led slowdown, its disciplined execution of operations and targeted growth initiatives. It benefited from strong underlying demand across its businesses in the last reported quarter. The company should also benefit from its strategic acquisitions.

The acquisition of the Tokai Carbon Black Plant is expected to boost growth of the company’s Battery Materials product line. The Tokai site has a present annual capacity of 50,000 metric tons of carbon black and Cabot’s planned investment will add more steam to the capabilities of battery-grade production.

The buyout of Tokai Carbon is in sync with Cabot’s strategy of executing growth opportunities in high-growth and high-performance markets such as battery materials. The investment will enable it to better meet the demand for lithium-ion batteries and run its operations responsibly such that they reduce the environmental impact.

The acquisition of Shenzhen Sanshun Nano New Materials has also significantly bolstered the market position and formulation capabilities of Cabot in the high-growth batteries market, especially in China, and provided opportunities to expand its position in the rapidly growing energy storage market.

The company also remains committed to returning capital to shareholders through dividends and share repurchases. It returned $36 million to shareholders through dividends and share repurchases in the most recent quarter.

Cabot, in its last quarter earnings call, stated that it is well positioned to deliver record adjusted earnings per share for fiscal 2022. Factoring in its strong first-half results and expectations for the second half of fiscal 2022, it raised its adjusted earnings per share outlook for the fiscal year by 30 cents at the midpoint to a new range of $5.80-$6.20. The company expects volumes to increase sequentially in the fiscal third quarter, driven by growth in Battery Materials applications.

 

Cabot Corporation Price and Consensus

 

Cabot Corporation Price and Consensus

Cabot Corporation price-consensus-chart | Cabot Corporation Quote

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Commercial Metals Company (CMC - Free Report) , Nutrien Ltd. (NTR - Free Report) and Steel Dynamics, Inc. (STLD - Free Report) .

Commercial Metals, carrying a Zacks Rank #1, has a projected earnings growth rate of 78.2% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised 31.9% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 16%, on average. CMC has gained around 21% in a year.

Nutrien, sporting a Zacks Rank #1, has an expected earnings growth rate of 161.9% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 38.8% upward over the last 60 days.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 5.8%, on average. NTR has rallied around 74% in a year.

Steel Dynamics, sporting a Zacks Rank #1, has an expected earnings growth rate of 28.6% for the current year. The Zacks Consensus Estimate for STLD's current-year earnings has been revised 43.8% upward over the last 60 days.

Steel Dynamics beat the Zacks Consensus Estimate for earnings in each of the last four quarters, the average being roughly 2.5%. STLD has gained around 26% in a year.