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Cabot (CBT) Up 20% in a Year: What’s Driving the Stock?


Shares of Cabot Corporation CBT have popped around 20% over the past year. The company has also trounced its industry’s growth of roughly 3% to over the same time frame.

Cabot, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $3.9 billion and average volume of shares traded in the last three months is around 333K. The company has an expected long-term earnings per share growth of 11%.

Let’s take a look into the factors that are driving this chemical company.

What’s Driving CBT?

Better-than-expected earnings performance in the last three quarters and upbeat prospects for Reinforcement Materials and Performance Chemicals segments have contributed to the rally in Cabot’s shares.

Cabot’s profits shot up around 87% year over year in the third quarter of fiscal 2018 on strong gains across its Reinforcement Materials and Performance Chemicals units. Adjusted earnings of $1.06 per share outstripped the Zacks Consensus Estimate of $1.03.

Notably, the company has topped the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 6%.

Cabot, during its fiscal third quarter call, said that it expects the Reinforcement Materials segment to continue performing strongly in the fourth quarter on the back of solid operational and commercial execution. For the Performance Chemicals segment, the company expects to maintain margins while driving volume growth in specialty Carbons and Formulations.

The Reinforcement Materials segment is benefiting from strong commercial execution that is driving volumes and margin growth. The Performance Chemicals unit is also gaining from favorable impact from price increase actions. Cabot is taking appropriate pricing actions to offset feedstock cost inflation. The company also remains committed to drive product mix in Performance Chemicals through new product launches and applications.

Moreover, Cabot is expanding its specialty compounds business globally. The acquisition of Tech Blend and commissioning of a new production line at its manufacturing facility in Belgium will help the company expand its global footprint in black masterbatch and compounds. It will also help boost manufacturing capacity to better serve customers globally and grow in advanced polymeric materials.

Cabot, in May, also declared significant expansion of capacity of its global network of carbon black plants. It is expanding its global capacity by more than 300,000 metric tons through a combination of operational improvements, plant expansion and debottlenecking projects.

Cabot Corporation Price and Consensus

Cabot Corporation Price and Consensus | Cabot Corporation Quote

Stocks to Consider

Stocks worth considering in the basic materials space include Celanese Corporation CE, Ingevity Corporation NGVT and Huntsman Corporation HUN, each sporting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Celanese has an expected long-term earnings growth rate of 10%. The company’s shares have gained around 17% in a year.

Ingevity has an expected long-term earnings growth rate of 12%. The company’s shares have rallied around 63% in a year.

Huntsman has an expected long-term earnings growth rate of 8.5%. Its shares have gained roughly 6% over a year.

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