This semiconductor supplier beat analysts’ estimates by $0.47 last quarter.
Cabot Microelectronics Corporation (CCMP)
From Upside
Last year Cabot Microelectronics (CCMP) doubled its dividend and nearly doubled its sales with the $1.5 billion acquisition of KMG Chemicals in November. The deal expanded Cabot’s portfolio of consumable products, used by customers to make smaller, faster, and more complex semiconductor devices. It also broadened Cabot’s customer base.
Prior to KMG, Cabot relied on three customers for 40% of its sales. Even before the KMG acquisition, Cabot was generating excellent operating momentum. It has delivered 11 straight quarters of double-digit sales growth and double-digit growth in operating cash flow in nine of the past 10 quarters.
For the March quarter, Cabot is expected to report 33% higher earnings per share on 92% revenue growth. Results are due on May 9. Although analyst estimates are trending higher, Cabot has a track record for managing expectations, having topped consensus estimates for both profits and sales in six straight quarters.
The shares have surged 32% in 2019 but trade at a reasonable 17 times estimated 2019 earnings, below a median of 20 for semiconductor equipment stocks in the S&P 1500 Index.
In March, Cabot raised its quarterly dividend 5% to $0.42 per share. Cabot is rated Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, May 2019