Cabot (CBT) Earnings and Revenues Surpass Estimates in Q3

Cabot Corporation CBT recorded a profit of $86 million or $1.48 per share in the third quarter of fiscal 2021 (ended Jun 30, 2021) against a loss of $6 million or 12 cents in the year-ago quarter.

Barring one-time items, adjusted earnings per share were $1.35 in the reported quarter against a loss of 7 cents in the year-ago quarter. The bottom line topped the Zacks Consensus Estimate of $1.19.

Net sales climbed 77% year over year to $917 million in the quarter. The metric beat the Zacks Consensus Estimate of $843.6 million. The company witnessed strength in volumes across all its segments. Implementation of price increases to maintain strong margins was beneficial amid headwinds from raw material costs. Moreover, targeted growth initiatives have brought in higher sales, including new adoptions at leading battery customers.

Cabot Corporation Price, Consensus and EPS Surprise

Cabot Corporation price-consensus-eps-surprise-chart | Cabot Corporation Quote

Segment Highlights

Reinforcement Materials’ sales shot up 143.1% year over year to $479 million in the quarter. Earnings before interest and tax (EBIT) in the segment were $85 million against a loss of $5 million in the year-ago quarter. The upside was led by improved pricing in Asia and significantly higher volumes across all regions, which was offset by the pandemic-related shutdowns.

Sales in the Performance Chemicals unit went up 37.7% year over year to $303 million in the fiscal third quarter. EBIT increased 157.1% to $54 million largely due to increased volumes and an improved product mix, boosted by higher sales in automotive applications and target-growth initiatives.

Sales in Purification Solutions grew 9.5% year over year to $69 million in the quarter. EBIT in the segment was $6 million, tripling from the prior-year quarter on the back of higher volumes in specialty applications and the benefits from insurance proceeds related to a plant outage in the first quarter of fiscal 2021.

Financial Position

Cabot had cash and cash equivalents of $173 million at the end of the fiscal third quarter, up 6.8% from the prior-year quarter’s level. The company’s long-term debt fell 6.5% to $1,088 million.

Cash flow from operating activities was $71 million, sharply falling from $149 million in the prior-year quarter.

Outlook

Cabot stated that it expects continued demand strength across all its segments for the fiscal fourth quarter. The company has increased guidance for adjusted earnings per share for fiscal 2021 to $4.85-$5.05 from the prior expectation of $4.70-$4.95. However, it anticipates certain headwinds in the fiscal fourth quarter in the form of an elevated level of fixed costs compared to the third quarter due to the timing of maintenance activities, negative impacts arising due to plant outages and higher feedstock differentials. Factoring in all the aspects, Cabot believes that it is well-positioned for fiscal 2022.

Price Performance

Cabot’s shares have risen 36.1% over a year compared with 31.5% growth of the industry.

Image Source: Zacks Investment Research

Zacks Rank & Other Stocks to Consider

Currently, Cabot carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the basic materials space include Orion Engineered Carbons S.A OEC, LyondellBasell Industries N.V. LYB and Avient Corporation AVNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Orion has a projected earnings growth rate of 79.8% for the current year. The company’s shares have grown 39.1% over the past year.

LyondellBasell has a projected earnings growth rate of 222.6% for the current year. The company’s shares have risen 42% over the past year.

Avient has a projected earnings growth rate of 65.3% for the current year. The company’s shares have surged 78.1% over the past year.

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