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What's in the Cards for Cabot Corp (CBT) in Q3 Earnings?

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Specialty chemicals and performance materials producer, Cabot Corp. (CBT - Free Report) , is  set to release third-quarter fiscal 2017 results after the market closes on Aug 1.  

Last quarter, the company delivered a positive earnings surprise of 2.35%. It reported adjusted earnings of 87 cents per share that beat the Zacks Consensus Estimate of 85 cents.

Net sales of $678 million rose 19.4% year over year, and exceeded the Zacks Consensus Estimate of $617 million. Revenues in the quarter were largely driven by higher volumes across all segments.

The company beat the Zacks Consensus Estimate in all of the trailing four quarters with an average positive surprise of 7.89%.

Cabot Corp. has lost 9.8% of its value in the last three months versus the 4.8% gain of its industry.


Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.

Factors to Consider

Cabot Corp., in its last earnings call, said that it expects volumes of the Reinforcement Materials segment to be in line with the second quarter, owing to higher level of planned maintenance activities. Cabot Corp. anticipates Purification Solutions to benefit from volume growth in the fiscal third quarter, which will be offset by costs associated with turnaround initiatives and inventory drawdown. The company is focused on delivering shareholder value by improving annual adjusted earnings by 7–10% over time and this year it expects to deliver adjusted earnings growth in the higher end of this range.

The company’s Reinforcement Segment witnessed its EBIT (earnings before interest and tax) increase by $20 million year over year in the last reported quarter. The higher EBIT was primarily driven by higher sales volume and unit margins arising from improved demand environment in China.

The Purification Solutions EBIT increased by $4 million year over year in second-quarter fiscal 2017 mainly due to favorable inventory comparisons and higher volume due to MATS–related demand.

The Specialty Fluids segment’s EBIT increased by $2 million year over year in the second quarter fiscal owing to increased sales volume Fine Cesium Chemicals.

The Performance Chemicals segment EBIT decreased year over year by $7 million in the last reported quarter mainly due to lower unit margins from higher feedstock costs, higher fixed costs and low volumes in CMP applications.

Cabot Corp. expects demand of Performance Chemicals end-markets to remain strong, but margins are likely to be affected from higher feedstock costs.

Cabot Corporation Price and EPS Surprise


Cabot Corporation Price and EPS Surprise | Cabot Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that Cabot Corp. is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP for Cabot Corp. is currently pegged at -3.53%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 82 cents and 85 cents, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cabot Corp. currently carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

The Chemours Company (CC - Free Report) has an Earnings ESP of +4.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +5.04% and a Zacks Rank #2.

Iamgold Corporation (IAG - Free Report) has an Earnings ESP of +300.00% and carries a Zacks Rank #3.

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