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Why Is Cabot (CBT) Down 2.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Cabot (CBT). Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cabot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Cabot's Earnings Top Estimates in Q2, Revenues Lag

Cabot recorded second-quarter fiscal 2024 (ending Mar 31, 2024) earnings of $1.49 per share, up from the year-ago quarter's $1.29.

The company posted adjusted earnings of $1.78 per share, up from the year-ago quarter figure of $1.33. It surpassed the Zacks Consensus Estimate of $1.66.

The company’s net sales in the fiscal second quarter were $1,019 million, which missed the Zacks Consensus Estimate of $1,054.1 million. Net sales decreased around 1.4% from the prior-year quarter.

Segment Highlights

Reinforcement Materials’ sales increased around 0.6% year over year to $676 million in the reported quarter, beating the Zacks Consensus Estimate of $667 million. Earnings before interest and tax (EBIT) in the segment were $149 million, up around 22% from the year-ago quarter. The rise in EBIT was primarily driven by greater unit margins resulting from higher pricing and product mix in 2024 customer agreements, as well as higher volumes in Asia and Europe.

Sales in the Performance Chemicals unit went down around 4.6% year over year to $311 million, missing the Zacks Consensus Estimate of $319 million in the reported quarter. EBIT increased around 10.7% to $31 million. The improvement in EBIT was primarily driven by increasing volumes. Higher volumes were mostly due to growth in the specialty carbons and specialty compounds product lines.

Financials

Cabot ended the second quarter of fiscal 2024 with cash and cash equivalents of $206 million. During the quarter, cash flows from operating activities were $176 million.

Capital expenditures totaled $43 million. During the quarter, cash was also used for dividend payments of $23 million and share repurchases of $24 million.

Outlook

The company anticipates Reinforcement Materials to continue generating strong results. Further, it is witnessing some positive demand signals in Performance Chemicals. The company now expects adjusted earnings per share for fiscal 2024 in the range of $6.65-$6.85.


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How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Cabot has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cabot has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Cabot is part of the Zacks Chemical - Diversified industry. Over the past month, DuPont de Nemours (DD), a stock from the same industry, has gained 1.3%. The company reported its results for the quarter ended March 2024 more than a month ago.

DuPont de Nemours reported revenues of $2.93 billion in the last reported quarter, representing a year-over-year change of -2.9%. EPS of $0.79 for the same period compares with $0.84 a year ago.

For the current quarter, DuPont de Nemours is expected to post earnings of $0.84 per share, indicating a change of -1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.

DuPont de Nemours has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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