This chemicals company beat analysts’ EPS projections by $0.42 last quarter, and five analysts have boosted their estimates for the company in the last 30 days. The shares have a current annual dividend yield of 2.26%, paid quarterly.
Cabot Corporation (CBT)
From Cabot Explorer
The basic chemicals and specialty materials market is one of the world’s largest industrial sectors. These materials are used in the aerospace, automotive, agriculture, building and construction, electronics, and transportation sectors. One of the lesser-known manufacturers of specialty chemicals is Cabot Corporation. Headquartered in Boston, the company was started in 1882 and now operates 45 manufacturing facilities in 21 countries around the world with strong growth in emerging markets.
Its edge is a combination of technical, commercial, and manufacturing talent that’s among the best in the industry, leading to constant innovation and technology. Its research and development capabilities have been proven over a century and the result is new products, decreased manufacturing downtime, higher margins, and improved energy efficiency.
One of the company’s key growth end markets is material used to make lithium-ion batteries. It sells carbon nanostructures, fumed metal oxides and conductive carbon black to battery manufacturers. Its chemicals are key enablers of increased battery performance. They create electrically conductive connections between battery layers. This enables faster charging, greater energy density and extended ranges and all of these are vital qualities needed for EV batteries. That makes it a one-stop shopping deal for battery manufacturers.
The future prospects for Cabot look very promising. The market for conductive carbon additives alone is expected to grow by $1 billion by 2025. Cabot reported adjusted earnings per share for its second quarter that were up a record 79% year over year to $1.38, from $0.77 year over year. Pre-tax earnings in materials increased 46% year over year to a record high of $89 million.
For fiscal 2021, Cabot projects earnings per share of $4.95, meaning that the stock is trading at just over 12 times forward earnings. In addition to a healthy balance sheet, Cabot also has a dividend yield of more than 2%. The stock is an effective hedge against inflation, and a play on economic recovery with exposure to the lithium-ion battery sector.
BUY A HALF
Carl Delfeld, Cabot Explorer, cabotwealth.com, 978-745-5532, May 13, 2021