Taking Stock of Cabot’s Risk Factors

Shares of specialty chemicals and performance materials provider Cabot Corp. (CBT) have gained 22.3% over the past 12 months. The company recently delivered a mixed set of results for the fourth quarter, with its top-line falling short of analysts’ estimates and its bottom-line exceeding expectations.

Additionally, Cabot recently agreed to sell its Purification Solutions business to One Equity Partners for a consideration of $111 million. Cabot also agreed to sell Norit Activated Carbon, which manufactures activated carbon for purification solutions, to One Equity Partners.

With these developments in mind, let us take a look at the changes in Cabot’s key risk factors that investors should know.

Risk Factors

According to the TipRanks Risk Factors tool, Cabot’s top two risk categories are Production and Macro & Political, contributing 24% each to the total 21 risks identified. In its recent annual report, the company has added one and changed two key risk factors.

The company added a new risk factor under the Legal & Regulatory risk category. Cabot highlighted that there is an increased focus on climate change and carbon neutrality at present. Consequently, the company may be exposed to certain regulatory and financial risks, which may adversely affect its business and results of operations. (See Insiders’ Hot Stocks on TipRanks)

In certain geographies, Cabot’s carbon black and activated carbon facilities are already or could become subject to greenhouse gas emission trading schemes, or carbon tax programs. In such circumstances, if its emission levels exceed its free allocation, Cabot may have to incur higher taxes or purchase emission credits.

Compared to a sector average of 12%, Cabot’s Macro & Political risk factor is at 24%.

Wall Street’s Take

On November 29, Loop Capital Markets analyst Chris Kapsch reiterated a Buy rating on the stock and increased the price target to $86 from $81 (68.7% upside potential).

Given the recent upward estimate revision cycle, and the expected strong fundamentals and performance in 2022, Kapsch finds Cabot’s current valuation inexpensive.

Consensus on the Street is a Strong Buy based on 3 Buys and 1 Hold. The average Cabot price target of $74.50 implies upside potential of 46.16% for the stock.

Related News:
Chegg Shares Rise 4% on Bussu Acquisition & Buybacks
Twitter CTO Parag Agrawal Replaces CEO Jack Dorsey
Accenture Renews Joint Investments with AWS