A month has gone by since the last earnings report for Cabot (CBT). Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cabot due for a pullback? 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 Q4 Earnings and Revenues Miss Estimates, Rise Y/Y
Cabot recorded a profit of $137 million or $2.43 per share for the fourth quarter of fiscal 2024 (ended Sept. 30, 2024) compared with $234 million or $4.10 in the year-ago quarter. Barring one-time items, adjusted earnings per share (EPS) were $1.80 in the reported quarter, up from $1.65 in the year-ago quarter. The figure, however, missed the Zacks Consensus Estimate of $1.82.
Net sales increased around 3.7% year over year to $1,001 million in the quarter. It missed the Zacks Consensus Estimate of $1,016.6 million.
Segment Highlights
Reinforcement Materials’ sales increased around 3.2% year over year to $644 million in the reported quarter. It missed the Zacks Consensus Estimate of $648.2 million. Reinforcement Materials' fourth-quarter fiscal 2024 EBIT declined $11 million from the fourth quarter of fiscal 2023. The decline in EBIT was due to reduced volumes in the Americas, a less advantageous regional mix and higher costs, slightly offset by improved pricing and product mix in 2024 customer agreements.
Sales in the Performance Chemicals unit went up around 5.2% year over year to $322 million in the reported quarter. It missed the Zacks Consensus Estimate of $339.9 million. EBIT in Performance Chemicals grew $8 million year over year, owing to a 2% rise in volumes and a more favorable product mix as a result of stronger sales into automotive and electronics end markets. The company's costs also increased throughout the quarter due to the timing of plant maintenance expenses.
Fiscal 2024 Results
Cabot's net income was $380 million or $6.72 per share compared with a profit of $445 million or $7.73 a year ago. The adjusted EPS for the fiscal year was $7.06.
Net sales rose around 1.6% year over year to $3,994 million.
Financial Position
The company had a cash balance of $223 million at the end of the fiscal fourth quarter. Cash flows from operating activities were $204 million. Capital expenditures totaled $92 million.
During the quarter, cash was also used for dividend payments of $24 million and share repurchases of $66 million.
Outlook
The company estimates fiscal 2025 adjusted EPS to be between $7.40 and $7.80, led by growth in the Reinforcement Materials segment and a steady recovery in the Performance Chemicals segment. This adjusted EPS range implies a 5% to 10% rise from the company's solid fiscal 2024 results. Furthermore, Cabot anticipates solid operational cash flow and discretionary free cash flow, driven by strong EBITDA, to enable ongoing investment in growth projects and capital return to shareholders.
How Have Estimates Been Moving Since Then?
It turns out, estimates review 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 second quintile 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 this revision looks promising. Notably, Cabot has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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