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Cabot's (CBT) Earnings and Sales Surpass Estimates in Q3

·4 min read

Cabot Corporation CBT recorded a profit of $97 million or $1.69 per share in the third quarter of fiscal 2022 (ended Jun 30, 2022) compared with $86 million or $1.48 per share in the year-ago quarter.

Barring one-time items, adjusted earnings per share were $1.73 in the reported quarter, up from $1.35 in the year-ago quarter. The figure topped the Zacks Consensus Estimate of $1.53. Our estimate for the quarter was $1.53.

Net sales increased around 25% year over year to $1,149 million in the quarter. It beat the Zacks Consensus Estimate by 10.15%. Our estimate for the quarter was $1,043.5 million.

The company’s results were aided by higher margins and stronger volumes across the board. Battery Materials delivered strong volume and earnings growth in the quarter with volumes rising 60% year over year. The company achieved strong performance in the quarter notwithstanding the impacts of pandemic-led lockdowns in China, sustained logistics challenges and higher energy and raw material costs.

 

Cabot Corporation Price, Consensus and EPS Surprise

 

Cabot Corporation Price, Consensus and EPS Surprise
Cabot Corporation Price, Consensus and EPS Surprise

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

 

Segment Highlights

Reinforcement Materials’ sales increased around 48% year over year to $707 million in the reported quarter. This compares to the consensus estimate of $626.9 million and our estimate of $628.8 million. Earnings before interest and tax (EBIT) in the segment were $113 million, up around 33% from the year-ago quarter. The upside can be attributed to improved unit margins from higher pricing in the calendar year 2022 customer agreements and higher volumes across all regions.

Sales in the Performance Chemicals unit went up around 23% year over year to $372 million in the reported quarter. This compares to the consensus estimate of $332.8 million and our estimate of $326.4 million. EBIT increased around 17% year over year to $63 million mainly due to higher unit margins, driven by price increases and product mix in the specialty carbons and fumed metal oxides product lines.

Financial Position

Cabot had cash and cash equivalents of $208 million at the end of the quarter, up around 20% from the prior-year quarter’s level. The company’s long-term debt fell to $1,097 million, up around 0.8% from the prior-year quarter.

Capital expenditures for the reported quarter were $50 million.

Cash flow from operating activities was $34 million for the quarter.

Outlook

Cabot 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. The company expects normal seasonal impacts on its volumes and higher levels of maintenance activity in the fourth quarter and anticipates continued strong pricing execution.

Price Performance

Shares of Cabot are up 30.6% in the past year against an 11.1% decline of the industry.

 

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Zacks Investment Research


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Zacks Rank & Key Picks

Cabot currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Sociedad Quimica y Minera de Chile S.A. SQM, Albemarle Corporation ALB and Daqo New Energy Corp. DQ.

Sociedad has a projected earnings growth rate of 513.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 57.8% upward in the past 60 days.

Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average being 28.2%. SQM has rallied roughly 91% in a year. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Albemarle has a projected earnings growth rate of 231.4% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 3.6% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 10% in a year and currently carries a Zacks Rank #1.

Daqo New Energy, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 160.8% for the current year. The Zacks Consensus Estimate for DQ's earnings for the current fiscal has been revised 13.5% upward in the past 60 days.

Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 10.8%. DQ has gained around 23% over a year.


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