Reasons Why You Should Retain Cabot Stock in Your Portfolio Now

Cabot Corporation CBT has been benefiting from its circular products, Battery Materials growth and expansions in capacity. Meanwhile, a weaker pricing environment in key markets and elevated input costs challenge Cabot’s performance.

The company’s shares have lost 0.1% over a year against the Zacks Chemical - Diversified industry’s 2.3% gain.

Let’s find out why CBT stock is worth retaining at the moment.

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Battery Growth and Capacity Expansions Drive Upside

Cabot is benefiting from the expansion of its circular masterbatch portfolio, battery-materials business, capacity additions and disciplined capital allocation. The launch of the REPLASBLAK circular black-masterbatch family under EVOLVE Sustainable Solutions strengthens Cabot’s specialty-compounds strategy by offering ISCC PLUS-certified products made from recycled or recovered carbon and plastics.

Acquisitions in China, including NSCC Carbon, carbon nanotube assets and Shenzhen Sanshun Nano New Materials, along with the Tokai carbon black plant, have added to the company’s Battery Materials capabilities. Battery-materials volumes increased in the fiscal third quarter on stronger demand from electric vehicles and battery energy storage systems, while management expects about $40 million of battery-materials EBITDA in fiscal 2026. Cabot is also pursuing a flexible brownfield approach to battery-materials expansion, with about $125 million of investment and new capacity expected in 2028.

Strong cash generation, planned share repurchases, a 1.4X net debt-to-EBITDA ratio and a $30-million fiscal 2026 cost-savings plan further support shareholder returns and operational efficiency.

Pricing Pressure and Rising Costs Weigh on CBT’s Results

Cabot continues to face pressure from weaker pricing in Reinforcement Materials, rising raw-material costs and elevated capital expenditures. Although global Reinforcement Materials volumes increased 5% year over year in the fiscal third quarter, segment EBIT declined 24% to $97 million as lower gross profit per ton more than offset volume and regional-mix benefits. The segment continues to absorb weaker pricing from calendar 2026 tire customer agreements. EMEA volumes also declined 4%, while management expects a modest sequential EBIT decline in the fiscal fourth quarter due to seasonal demand and an unfavorable regional mix, particularly in Europe.

Rapidly rising raw-material costs increased fiscal third-quarter net working capital by about $44 million, while Performance Chemicals’ benefit from pricing ahead of these increases is expected to fade as higher input costs catch up.

Capital spending also remains significant, with $152 million spent in the first nine months and full-year guidance of $200-$215 million. The planned $125-million battery-materials capacity expansion in the United States and China could further constrain near-term free cash flow as Cabot continues to fund dividends and share repurchases.

Cabot Corporation Price and Consensus

Cabot Corporation price-consensus-chart | Cabot Corporation Quote

CBT’s Zacks Rank & Key Picks

CBT currently carries a Zacks Rank #3 (Hold)

Some better-ranked stocks in the Basic Materials space are Neo Performance Materials Inc. NOPMF, Carpenter Technology Corporation CRS and Avient Corporation AVNT.

While NOPMF currently sports a Zacks Rank #1 (Strong Buy), CRS and AVNT carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for NOPMF’s 2026 earnings is pinned at $1.4 per share, indicating a 185.71% year-over-year increase. NOPMF’sshares have gained 83.2% over the past year.

The Zacks Consensus Estimate for CRS’ fiscal 2027 earnings is pegged at $12.92 per share, indicating a rise of 20.07% year over year. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 8.39%.

The Zacks Consensus Estimate for AVNT’s current-year earnings is pinned at $3.2 per share, indicating a 13.48% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 3.4%. AVNT’sshares have gained 20.3% over the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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