Cabot Corporation CBT recorded a profit of $94 million or $1.64 per share in the fourth quarter of fiscal 2022 (ended Sep 30, 2022) compared with $29 million or 50 cents per share in the year-ago quarter.

Barring one-time items, adjusted earnings per share were $1.55 in the reported quarter, up from $1.11 in the year-ago quarter. The figure topped the Zacks Consensus Estimate of $1.48.

Net sales increased around 23% year over year to $1,112 million in the quarter. It beat the Zacks Consensus Estimate of $1,037.7 million.

The company’s results were aided by higher margins and stronger volumes. Battery Materials delivered strong growth in the quarter.

Cabot Corporation Price, Consensus and EPS Surprise

Cabot Corporation price-consensus-eps-surprise-chart | Cabot Corporation Quote

Segment Highlights

Reinforcement Materials’ sales increased around 42% year over year to $700 million in the reported quarter. Earnings before interest and tax (EBIT) in the segment were $109 million, up around 63% from the year-ago quarter. The upside can be attributed to improved unit margins from higher pricing in the calendar year 2022 customer agreements and higher volumes across all regions.

Sales in the Performance Chemicals unit went up around 19% year over year to $338 million in the reported quarter. EBIT increased around 9% year over year to $49 million mainly due to increased volumes and higher unit margins, driven by price increases and better product mix in the specialty carbons and fumed metal oxides product lines.

Fiscal 2022 Results

Profit (as reported) or full-year fiscal 2022 was $209 million or $3.62 per share, compared with $250 million or $4.34 per share a year ago. Revenues were $4.3 billion for the fiscal, up around 27% year over year.

Financial Position

Cabot had cash and cash equivalents of $206 million at the end of the fiscal, up around 23% year over year. The company’s long-term debt was $1,089 million, up around 52% year over year.

Capital expenditures for the reported quarter were $90 million.

Cash flow from operating activities was $105 million for the quarter.

Outlook

Cabot sees adjusted earnings per share for fiscal 2023 in the band of $6.25-$6.75 factoring in strength in the Reinforcement Materials segment and above-market growth in Battery Materials. The company also expects strong operating cash flow driven by solid EBITDA and its expectation for moderating feedstock costs.

For Reinforcement Materials, the company sees stable volumes along with higher pricing in its 2023 calendar year customer agreements to drive year-over-year growth in segment EBIT in fiscal 2023. For Performance Chemicals, it expects volumes in Battery Materials growth vector to rise more than 50% year-over-year with EBITDA in the band of $45-$50 million. In the other businesses within Performance Chemicals, it envisions results to be impacted in the first half of fiscal 2023 due to weaker demand, especially in Europe.

Price Performance

Shares of Cabot are up 26.4% in the past year against a 4.4% decline of the industry.

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Zacks Rank & Key Picks

Cabot currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks worth considering in the basic materials space include Albemarle Corporation ALB, Commercial Metals Company CMC and Reliance Steel & Aluminum Co. RS.

Albemarle, currently carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 420.3% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 5.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 20% in a year.

Commercial Metals currently carries a Zacks Rank #2. The Zacks Consensus Estimate for CMC's current-year earnings has been revised 3.8% upward in the past 60 days.

Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 19.7%, on average. CMC has gained around 38% in a year.

Reliance Steel, currently carrying a Zacks Rank #2, has a projected earnings growth rate of 29.7% for the current year. The Zacks Consensus Estimate for RS's current-year earnings has been revised 0.1% upward in the past 60 days.

Reliance Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 13.6%, on average. RS has gained around 18% in a year.

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