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Cabot (CBT) Shares Up 10% QTD: What's Driving the Stock?

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Shares of Cabot Corporation CBT have popped around 10% quarter to date. The company has also outperformed its industry’s rise of roughly 3% to over the same time frame. The price performance has been backed by its strong fiscal second-quarter earnings results.    

Cabot, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $3.8 billion and average volume of shares traded in the last three months is around 496.5K. The company has an expected long-term earnings per share growth of 10.4%, modestly higher than the industry average of 10.2%.

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


What’s Driving CBT?

Forecast-topping earnings performance in the fiscal second quarter and upbeat outlook for Reinforcement Materials and Performance Chemicals segments have contributed to the gain in Cabot’s shares. The company’s adjusted earnings and sales for the quarter topped the Zacks Consensus Estimate. The results were driven by strong performance across the Reinforcement Materials and Performance Chemicals segments.

Cabot, during second-quarter earnings call, stated that it expects its 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.

The Performance Chemicals segment is gaining from favorable impact from price increase actions. Cabot is taking appropriate pricing actions to offset feedstock cost inflation and expects higher volumes in this unit in the fiscal third quarter. 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, last month, 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 will add capacity of roughly 160,000 metric tons through an expansion at its facility in Indonesia that will serve the increasing demand of carbon black in Southeast Asia. Moreover, Cabot is investing roughly $50 million in debottlenecking projects and operational improvements, which will provide an additional 150,000 metric tons of increased carbon black capacity. These investments are expected to increase its global carbon black capacity to roughly 2.5 million metric tons.

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 Westlake Chemical Corporation WLK, The Chemours Company CC and FMC Corporation FMC, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied roughly 67% over a year.

Chemours has an expected long-term earnings growth rate of 15.5%. The company’s shares have rallied around 34% in a year.

FMC has an expected long-term earnings growth rate of 14.3%. Its shares have gained roughly 19% over a year.

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