Is A Beat In The Cards For Cabot Corp (CBT) In Q4 Earnings?

Specialty chemicals and performance materials producer, Cabot Corporation (NYSE:CBT) , is set to release fourth-quarter fiscal 2017 results after the market closes on Oct 31.

Last quarter, the company delivered a negative earnings surprise of 4.7%. It reported adjusted earnings of 81 cents per share that missed the Zacks Consensus Estimate of 85 cents.

Revenues increased around 13.5% year over year to $705 million in the second quarter, which beat the Zacks Consensus Estimate of $661 million.

The company beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing in one, with an average positive surprise of 6.4%.

Cabot Corp.’s shares have moved up 9.9% over the last three months, underperforming the industry’s 10% growth.

Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.

Earnings Whispers

Our proven model shows that Cabot Corp. is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Zacks ESP: Earnings ESP for Cabot Corp. for the fiscal fourth quarter is +1.62%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 94 cents and 93 cents, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cabot Corp. currently carries a Zacks Rank #2, which when combined with a positive ESP, makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

Cabot Corp., in August, said that it believes that the Reinforcement Materials segment will continue to impress, although the company is expected to see modestly higher fixed costs in the fourth quarter. The end markets in Performance Chemicals are anticipated to remain strong and the segment’s volumes and product mix are expected to improve with the resolution of the unplanned downtime. Purification Solutions is expected to gain from seasonal volume growth and lower fixed costs in the fourth quarter. The company remains focused on delivering shareholder value by growing annual adjusted earnings per share by 7-10% over time.

Revenues in the Reinforcement Materials segment increased 36% year over year in the last reported quarter while the EBIT went up 46% year over year, mainly supported by favorable pricing and product mix. However, the segment’s sales and EBIT declined on sequential basis due to reduced demand in Asia and higher costs.

Sales from the Performance Chemicals remained almost flat year over year in the last reported quarter, while EBIT declined mainly due to the impact of unplanned downtime on volume and costs in Specialty Carbons and Formulations and higher feedstock costs.

Sales and EBIT of both Purification Solutions and Specialty Fluids declined year over year in the fiscal third quarter. While the Purification Solutions segment was adversely affected by unfavorable product mix, lower volumes and increase in fixed costs associated with a plant disruption, the Specialty Fluids experienced lower project activity in the North Sea.

Cabot Corp.’s revenues for the fiscal fourth quarter is projected to rise 10.9% year over year as the Zacks Consensus Estimate for the fourth quarter is pegged at $686.5 million.

Other Stocks Poised to Beat Estimates

Here are some other companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

Westlake Chemical Corporation (NYSE:WLK) has an Earnings ESP of +3.78% and sports a Zacks Rank #1.

CF Industries Holdings, Inc. (NYSE:CF) has an Earnings ESP of +1.83% and carries a Zacks Rank #2.

United States Steel Corporation (NYSE:X) has an Earnings ESP of +2.41% and carries a Zacks Rank #3.

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