Cabot (CBT) Stock Up 30% in 3 Months: What's Driving the Rally?
Cabot Corporation’s CBT shares have shot up 29.8% over the past three months. The company has also outperformed its industry’s rise of 11.8% over the same time frame. Moreover, it has topped the S&P 500’s 7.8% rise over the same period.
Let’s take a look into the factors behind this Zacks Rank #1 (Strong Buy) stock’s price appreciation.
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What’s Going in CBT’s Favor?
Better-than-expected earnings performance in the second quarter of fiscal 2021 and upbeat prospects have contributed to the run-up in the company's shares. Cabot’s adjusted earnings per share for the fiscal second quarter rose to $1.38 from 77 cents in the year-ago quarter. It also topped the Zacks Consensus Estimate of 97 cents. Net sales climbed around 19% year over year to $842 million in the quarter and also surpassed the Zacks Consensus Estimate of $745.6 million.
The company witnessed strength in volumes in all regions and favorable pricing in the Reinforcement Materials segment in the fiscal second quarter. Its Performance Chemicals segment also benefited from higher volumes and improved product mix, courtesy of higher sales in automotive applications.
Cabot, in its second-quarter call, stated that it expects continued demand strength across all its segments in the second half of the fiscal. The company envisions volumes to remain strong through the second half. It also expects adjusted earnings per share for fiscal 2021 to be between $4.70 and $4.95.
Earnings estimates for Cabot have also been going up over the past two months. The Zacks Consensus Estimate for fiscal 2021 has increased around 23.7% while the same for third-quarter fiscal 2021 has gone up 27.1%. The favorable estimate revisions instill investor confidence in the stock.
Cabot should gain from a recovery in demand from its automotive and tire customers from the pandemic-led slowdown, its disciplined execution of operations and targeted growth initiatives. The company saw strong volumes in the tire and automotive markets in the fiscal second quarter on the back of continued global recovery. Passenger car miles driven and automotive builds have improved while strong truck miles driven is driving the replacement tire market. The company is also benefiting from strength in infrastructure, packaging and consumer-driven applications.
The company should also benefit from the acquisition of Shenzhen Sanshun Nano New Materials. The acquisition significantly bolsters the market position and formulation capabilities of Cabot in the high-growth batteries market, especially in China. The buyout is also expected to create opportunities to expand Cabot’s position in the rapidly growing energy storage market.
Cabot Corporation Price and Consensus
Cabot Corporation price-consensus-chart | Cabot Corporation Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Dow Inc. DOW, Nucor Corporation NUE and Impala Platinum Holdings Limited IMPUY.
Dow has a projected earnings growth rate of roughly 261.5% for the current year. The company’s shares have surged 69% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nucor has a projected earnings growth rate of 238% for the current year. The company’s shares have rallied around 151% in a year. It currently sports a Zacks Rank #1.
Impala Platinum has an expected earnings growth rate of 225.2% for the current fiscal. The company’s shares have surged around 144% in the past year. It currently carries a Zacks Rank #2 (Buy).
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