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Cabot's (CBT) Q3 Earnings In Line, Revenues Miss Estimates

Zacks Equity Research

Cabot Corporation CBT posted profit of $32 million or 55 cents per share in the third quarter of fiscal 2019 (ended Jun 30, 2019), down from $88 million or $1.40 in the year-ago quarter.

Barring one-time items, adjusted earnings per share were $1.00, down from $1.06 in the year-ago quarter. Earnings per share matched the Zacks Consensus Estimate.

Net sales fell around 1% year over year to $845 million in the quarter. It trailed the Zacks Consensus Estimate of $864.6 million.

The company faced a challenging environment in the quarter, hurting results across its Reinforcement Materials and Performance Chemicals divisions. It saw a weak business environment in China and sustained weakness in automotive production. These were, in part, offset by the positive impact of 2019 tire customer agreements and improved results in the company’s Purification Solutions unit.

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 fell around 1% year over year to $461 million in the fiscal third quarter. EBIT in the segment was $72 million, down around 3% year over year. The results were hurt by reduced margins in China and lower volumes due to weak automotive production, partly offset by the favorable impact of the company’s tire customer agreements.

Sales in the Performance Chemicals unit dropped around 8% year over year to $251 million in the quarter. EBIT tumbled 34% year over year to $37 million, due to lower volumes and a less favorable product mix.

Sales in the Purification Solutions went up 4% year over year to $73 million in the quarter. The unit gained from higher volumes and prices in specialty applications.

The Specialty Fluids segment’s sales rose roughly 8% year-over-year to $13 million.

Financial Position

Cabot had cash and cash equivalents of $147 million at the end of the quarter, up around 12% year over year. The company’s long-term debt went up around 61% year over year to $1,017 million.

Cash flows from operating activities were $115 million in the reported quarter. Capital expenditures were $58 million.

Outlook

Cabot now envisions adjusted earnings per share for fiscal 2019 to be comparable to fiscal 2018. The guidance reflects a strong fourth quarter based on the startup of the company’s new fumed silica facility as well as targeted customer and incremental cost actions. The company will continue to manage its capital spending and reduce working capital levels amid the challenging business environment. It also remains focused on generating strong cash flows.
 
Price Performance

Shares of Cabot have lost 38.2% in the past year compared with the industry’s 40.3% decline.



 

 

Zacks Rank & Key Picks

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

Better-ranked stocks worth considering in the basic materials space include SSR Mining Inc. SSRM, Kinross Gold Corporation KGC and Flexible Solutions International Inc FSI.

SSR Mining has an estimated earnings growth rate of 134.8% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have rallied 63% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has projected earnings growth rate of 110% for the current year and carries a Zacks Rank #1. The company’s shares have gained 44% in a year’s time.

Flexible Solutions has an expected earnings growth rate of 342.9% for the current fiscal year and carries Zacks Rank #2 (Buy). Its shares have surged around 104% in the past year.

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