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Cabot (CBT) Up 11% in 3 Months: What's Driving the Stock?

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Shares of Cabot Corporation (CBT - Free Report) have gained around 11% over the past three months. The company has also outperformed its industry’s decline of roughly 0.6% to over the same time frame. The price performance has been backed by its strong fiscal third-quarter earnings results.    

Cabot, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $4 billion and average volume of shares traded in the last three months is around 390.8K. The company has an expected long-term earnings per share growth of 10.5%.

Let’s take a look into the factors that are driving this chemical company.



 

Driving Factors

Forecast-topping earnings performance in the fiscal third quarter and upbeat outlook for Reinforcement Materials and Performance Chemicals segments have contributed to the gain in Cabot’s shares.

Cabot saw its profits surge around 87% year over year in the third quarter of fiscal 2018 on strong gains across its Reinforcement Materials and Performance Chemicals units. Adjusted earnings of $1.06 per share topped the Zacks Consensus Estimate of $1.03.

Net sales increased around 21% year over year to $854 million in the quarter and outpaced the Zacks Consensus Estimate of $831 million.

Cabot, during its fiscal third quarter call, said that it expects the Reinforcement Materials segment to continue performing strongly in the fourth quarter on the back of solid operational and commercial execution. For the Performance Chemicals segment, the company expects to maintain margins while driving volume growth in specialty Carbons and Formulations.

The company expects competitive pressure to impact results at the Purification Solutions segment. However, it anticipates higher seasonal volumes in the fourth quarter. For the Specialty Fluids segment, Cabot expects continued ramp up of drilling activity on recent projects to boost results in the fourth quarter.  

The Reinforcement Materials segment is benefiting from strong commercial execution that is driving volumes and margin growth. The Performance Chemicals unit is also gaining from favorable impact from price increase actions. Cabot is taking appropriate pricing actions to offset feedstock cost inflation. The company also remains committed to drive product mix in Performance Chemicals through new product launches and applications.

Cabot also boosting its specialty compounds business globally. The buyout of Tech Blend and commissioning of a new production line at its manufacturing facility in Belgium will help the company expand its global footprint in black masterbatch and compounds. It will also help beef up manufacturing capacity to better serve customers globally and grow in advanced polymeric materials. The company now has a complete range of black masterbatches from five manufacturing locations throughout Europe, Middle East, Asia and North America.

The company, in May, also declared significant expansion of capacity of its global network of carbon black plants. It is expanding its global capacity by more than 300,000 metric tons through a combination of operational improvements, plant expansion and debottlenecking projects. 

Cabot Corporation Price and Consensus

 

Cabot Corporation Price and Consensus | Cabot Corporation Quote

Stocks to Consider

Stocks worth considering in the basic materials space include Celanese Corporation (CE - Free Report) , Huntsman Corporation (HUN - Free Report) and Air Products and Chemicals, Inc. (APD - Free Report) .

Celanese has an expected long-term earnings growth rate of 10% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained around 19% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntsman has an expected long-term earnings growth rate of 8.5% and a Zacks Rank #1. The company’s shares have rallied around 23% in a year.

Air Products has an expected long-term earnings growth rate of 16.2% and carries a Zacks Rank #2 (Buy). Its shares have gained roughly 14% over a year.

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