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Cabot (CBT) to Report Q3 Earnings: What's in the Cards?

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Cabot Corporation (CBT - Free Report) is set to release third-quarter fiscal 2018 results, after the market closes on Aug 6.

In the last reported quarter, the company incurred net loss of $173 million or $2.80 per share against a net profit of $74 million or $1.19 a year ago. Adjusted earnings of $1.04 per share beat the Zacks Consensus Estimate of $1.00.

Net sales increased around 20.6% year over year to $818 million in the quarter, also outpacing the Zacks Consensus Estimate of $744.2 million.

Cabot beat the Zacks Consensus Estimate in two of the trailing four quarters, while missing in the other two, with an average positive surprise of 4.1%.

Cabot’s shares have gained 17.8% over the past three months, outperforming the industry’s 5.1% growth.

Let’s see how things are shaping up for this announcement.

Factors at Play

Cabot, during second-quarter fiscal 2018 earnings call, stated that it expects Reinforcement Materials segment to continue its strong performance for the remainder of the year on the back of strong execution in a favorable market. For the Performance Chemicals segment, it expects to maintain margins while driving volume growth.

Moreover, the Performance Chemicals segment is expected to see an improvement on favorable impact from price increases. The company is taking appropriate pricing actions to offset higher feedstock costs and expects higher volumes in this unit in the fiscal third quarter.

Consolidated revenues for the fiscal third quarter are projected to rise 1.5% sequentially and 17.9% year over year, as the Zacks Consensus Estimate is currently pegged at $831 million.

The Reinforcement Materials unit demonstrated a healthy performance in the fiscal second quarter as sales increased 29% year over year to $454 million. Profitability at the segment also jumped on improved pricing and product mix from calendar year 2018 customer agreements and higher prices in Asia. The company expects the segment to benefit from a favorable market environment.

Sales at the Performance Chemicals rose almost 17.5% year over year to $268 million in the fiscal second quarter. Profitability rose on favorable product mix and higher unit margins owing to price increases that more than offset raw materials cost inflation.  The company expects higher volumes in this unit in the fiscal third quarter. Cabot also remains committed to drive product mix in Performance Chemicals through new product launches and applications.

Profitability at the Purification Solutions unit in the last reported quarter was hurt by lower volumes and margins owing to increased competition and a drop in demand in mercury removal applications.  The company expects ongoing competitive pressures to impact results in the unit amid lower variable costs and higher seasonal volumes in the second half of the year.

In the last reported quarter, profitability in the Specialty Fluids unit was impacted by a drop in project activity. The company expects the startup of drilling activity on previously awarded projects, which is likely to drive results in this unit in the remainder of the year.

Cabot Corporation Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show that Cabot is likely to beat the Zacks Consensus Estimate this quarter. That 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. That is not the case here, as you will see below:

Earnings ESP: Earnings ESP for Cabot for the fiscal third quarter is -0.80%. The Zacks Consensus Estimate for the quarter is pegged at $1.03. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cabot currently carries a Zacks Rank #4 (Sell). Note that stocks with a Zacks Rank #4 or 5 (Strong Sell) should never be considered going into an earnings announcement.
 
Stocks Poised to Beat Estimates

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

Orion Engineered Carbons, S.A. (OEC - Free Report) has an Earnings ESP of +3.85% and a Zacks Rank #2.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Rayonier Advanced Materials Inc. (RYAM - Free Report) has an Earnings ESP of +8.74% and a Zacks Rank #2

The Chemours Company (CC - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #3.  
 

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