It's been a pretty great week for Cabot Corporation (NYSE:CBT) shareholders, with its shares surging 14% to US$49.72 in the week since its latest yearly results. Revenues were in line with forecasts, at US$3.3b, although earnings per share came in 18% below what analysts expected, at US$2.63 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see whether the latest forecasts would suggest a change of heart on the company. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Following last week's earnings report, Cabot's seven analysts are forecasting 2020 revenues to be US$3.3b, approximately in line with the last 12 months. Earnings per share are expected to jump 48% to US$3.95. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.4b and earnings per share (EPS) of US$4.40 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a substantial drop in earnings per share forecasts.
Analysts made no major changes to their price target of US$50.90, suggesting the downgrades are not expected to have a long-term impact on Cabot's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Cabot analyst has a price target of US$65.00 per share, while the most pessimistic values it at US$42.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.9% a significant reduction from annual growth of 0.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 4.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Cabot to grow slower than the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Cabot. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$50.90, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Cabot going out to 2024, and you can see them free on our platform here..
It might also be worth considering whether Cabot's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.