Analysts might have been a bit too bullish on Cabot Corporation (NYSE:CBT), given that the company fell short of expectations when it released its quarterly results last week. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$727m, statutory earnings missed forecasts by 11%, coming in at just US$0.70 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Cabot after the latest results.
Following last week's earnings report, Cabot's eight analysts are forecasting 2020 revenues to be US$3.21b, approximately in line with the last 12 months. Statutory earnings per share are expected to shoot up 69% to US$3.70. Before this earnings report, analysts had been forecasting revenues of US$3.28b and earnings per share (EPS) of US$3.80 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
The consensus price target held steady at US$48.40, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Cabot analyst has a price target of US$58.00 per share, while the most pessimistic values it at US$37.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.9% a significant reduction from annual growth of 2.6% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 3.6% next year. It's pretty clear that Cabot's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Cabot. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Cabot analysts - going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Cabot's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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