UBS cuts Cabot Corp stock price target to $93, keeps neutral rating

On Tuesday, UBS analyst Joshua Spector adjusted the price target for Cabot Corp (NYSE:CBT) stock, bringing it down to $93 from the previous $98, while maintaining a Neutral rating on the shares. According to InvestingPro data, the stock appears undervalued, trading at an attractive EV/EBITDA multiple of 7.4x and offering a compelling 10% free cash flow yield. Spector anticipates a positive reaction from the market following the company’s recent financial performance, which surpassed the expectations set by its peers in the commodity chemicals sector.

Cabot Corp reported earnings per share (EPS) of $1.76 for the December quarter, which was slightly above the consensus by 2%. The company’s EBITDA for the same period was $199 million, aligning with expectations, although this was partly due to lower corporate costs, which were $4 million below UBS and consensus estimates. InvestingPro analysis shows the company maintains a "GREAT" financial health score of 3.28/5, supported by strong profitability metrics and solid balance sheet fundamentals. Spector noted that market expectations were for EBITDA to be between $185 and $190 million, indicating that the results would have been favorable even without the benefit of reduced corporate expenses.

The company’s performance in its Reinforcement Materials and Performance Chemicals segments was notably better than anticipated, with reinforcement margins also exceeding UBS estimates. Spector highlighted that while the impact of price gains from the 2025 tire contract cycle remains uncertain, Cabot Corp’s decision to maintain its guidance range suggests a positive outcome despite negative foreign exchange movements since the initial guidance was provided. The company’s financial stability is further evidenced by its impressive 55-year streak of maintaining dividend payments, with 13 consecutive years of dividend increases.

Spector also pointed out that potential tariffs between the US, Canada, and Mexico could pose a risk to the company’s financial outlook, although these have not been factored into the current guidance range. UBS will continue to monitor these developments closely. Investors seeking deeper insights can access comprehensive analysis and 10+ additional ProTips through InvestingPro, which offers detailed valuation metrics and expert research reports for over 1,400 US stocks.

Cabot Corp’s recent financial results and the company’s ability to uphold its full-year guidance in the face of industry headwinds have led to UBS’s decision to maintain a Neutral rating, despite the lowered price target on the stock. With a P/E ratio of 12.6x and strong return metrics, including a 28% return on equity, the company continues to demonstrate solid fundamental performance.

In other recent news, Cabot Corporation has been subject to a revised price target by Mizuho (NYSE:MFG) Securities, which reduced it from $110 to $105, while maintaining an Outperform rating on the company’s shares. This adjustment is a result of recent market developments and changes in contract prices for tire black, a key material in tire manufacturing. Cabot’s strategy to pass on the cost of higher oil prices through planned specialty black price increases was also noted.

Further, the company has reported mixed results for its fiscal first quarter, with earnings exceeding analyst expectations, but revenue falling short. Cabot posted adjusted earnings per share of $1.76, surpassing the analyst consensus of $1.74, but revenue was $955 million, below Wall Street’s forecast of $995.43 million. Despite these results, Cabot reaffirmed its full-year earnings guidance.

Cabot’s Reinforcement Materials segment saw a 1% year-over-year EBIT rise to $130 million, while its Performance Chemicals segment EBIT jumped 32% to $45 million. The company’s ability to navigate these changing market dynamics will be crucial in maintaining its Outperform status, as per Mizuho Securities. These are some of the recent developments concerning Cabot Corporation.

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