Cabot Corporation CBT reported profits of $41 million or 70 cents per share in the first quarter of fiscal 2019 (ended Dec 31, 2019), down from $69 million or $1.14 per share in the year-ago quarter.
Barring one-time items, adjusted earnings per share were 69 cents, down from 87 cents in the year-ago quarter. Also, the figure missed the Zacks Consensus Estimate of 76 cents.
Net sales fell 11.4% year over year to $727 million in the quarter. It also trailed the Zacks Consensus Estimate of $793.6 million.
Cabot Corporation Price, Consensus and EPS Surprise
Cabot Corporation price-consensus-eps-surprise-chart | Cabot Corporation Quote
Reinforcement Materials’ sales fell 17.1% year over year to $379 million in the reported quarter. Earnings before Interest and Tax (EBIT) in the segment were $47 million, down 24.2% year over year. Margins were affected by lower volumes globally, which also led to lower energy center revenues and a slower inventory turnover.
Sales in the Performance Chemicals unit went up 4.8% year over year to $242 million in the reported quarter. EBIT rose 13.9% year over year to $41 million on higher volume.
Sales in the Purification Solutions declined 9.2% year over year to $59 million in the quarter. The segment generated a loss of $2 million, which was narrower than a loss of $3 million in the year-ago quarter.
Cabot had cash and cash equivalents of $173 million at the end of fiscal first quarter, up 21.8% year over year. The company’s long-term debt rose 73.5% year over year to $1,095 million.
Cash flows from operating activities were $105 million in the reported quarter. Capital expenditures were $68 million.
For the Reinforcement Materials unit, the company expects to benefit from the calendar year 2020 customer agreements. Moreover, volumes are likely to return to a normalized level starting second-quarter fiscal 2020.
In the Performance Chemicals unit, the company anticipates the challenging price environment for fumed silica in Europe and China that it witnessed during the fiscal first quarter. The trend is likely to continue in the near-term.
For the Purification Solutions unit, the company continues to expect improvement in EBIT on a year-over-year basis.
For fiscal 2020, adjusted earnings are projected in the range of $3.60-$3.90 per share compared with $3.60-$4.10 expected earlier.
Shares of Cabot have lost 16.6% in the past year compared with the industry’s 29.6% decline.
Zacks Rank & Key Picks
Cabot currently carries a Zacks Rank #4 (Sell).
Few better-ranked stocks in the basic materials space are Daqo New Energy Corp DQ, Royal Gold, Inc RGLD and Impala Platinum Holdings Limited IMPUY, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy has projected earnings growth rate of 326.3% for 2020. The company’s shares have rallied 30.5% in the past year.
Royal Gold has an estimated earnings growth rate of 83.5% for fiscal 2020. Its shares have returned 30.3% in the past year.
Impala Platinum has an expected earnings growth rate of 465.5% for fiscal 2020. The company’s shares have surged 206.3% in the past year.
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