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Cabot's (CBT) Shares Up 17% YTD: What's Driving the Stock?

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Cabot Corporation’s (CBT - Free Report) shares have gained 16.8% so far this year. The company has also outperformed its industry’s decline of 20.7% over the same time frame. Moreover, it has topped the S&P 500’s 22.5% decline over the same period.

Let’s take a look into the factors behind this Zacks Rank #3 (Hold) stock’s price appreciation.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

What’s Driving CBT?

Cabot is benefiting from a recovery in demand from the pandemic-led slowdown, its disciplined execution of operations and targeted growth initiatives. The company is also well placed to 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 buyout 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 company is also benefiting from strong underlying demand across its businesses. Higher volumes and favorable pricing are driving results in its Reinforcement Materials segment. The company is witnessing strong replacement tire demand.

Cabot’s pricing and product mix actions are also driving results in the Performance Chemicals unit. It is seeing strong momentum in battery materials applications with volumes rising 60% year over year in the fiscal third quarter. The company sees sequential volume growth in battery materials in the fiscal fourth quarter. It also expects the start-up of the new Xuzhou, China plant to support growth in both battery materials and specialty carbons.

The company, last month, tightened the range of its adjusted earnings per share outlook for fiscal 2022 to $6.10-$6.20 factoring in strong year-to-date results and its expectations for the fiscal fourth quarter. This is at the top-end of its earlier communicated range of $5.80-$6.20.

Earnings estimates for fiscal 2022 have also been going up over the past two months. The Zacks Consensus Estimate for the fiscal has increased around 0.8%.

 

Cabot Corporation Price and Consensus

 

Cabot Corporation Price and Consensus

Cabot Corporation price-consensus-chart | Cabot Corporation Quote

 

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space include Livent Corporation (LTHM - Free Report) , Innospec Inc. (IOSP - Free Report) and Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) .

Livent, currently sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 667% for the current year. The Zacks Consensus Estimate for LTHM's current-year earnings has been revised 9.5% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Livent’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 15.7%. LTHM has gained around 28% in a year.

Innospec, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 23.5% for the current year. The consensus estimate for IOSP's earnings for the current year has been revised 6.1% upward in the past 60 days.

Innospec’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. IOSP has gained around 2% over a year.

Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.

Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 75% in a year. The company carries a Zacks Rank #2.

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