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CABOT CORP (CBT)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered resilient profitability despite softer volumes: Adjusted EPS of $1.90 (flat YoY) and diluted EPS of $1.86; revenue declined 9% YoY to $0.923B as demand softened amid tariff uncertainty and weaker macro .
  • Against S&P Global consensus, Cabot posted an EPS beat and a revenue miss: Adjusted EPS $1.90 vs $1.83 consensus*, revenue $923M vs $955M consensus* .
  • Guidance: FY25 Adjusted EPS range reaffirmed at $7.15–$7.50 (lowered last quarter from $7.40–$7.80), with management indicating outcomes skew to mid-to-low end at current demand; operating tax rate maintained at 27%–29% .
  • Capital deployment and balance sheet remained strong: Q3 operating cash flow $249M, FCF $188M, $64M returned to shareholders; net debt/EBITDA 1.3x and liquidity $1.4B support continued investment and buybacks/dividends .
  • Stock catalysts ahead: tariff outcomes impacting tire imports/utilization, closing of Bridgestone Mexico carbon black acquisition ($70M), and battery materials product launches (LITX 95F) .

What Went Well and What Went Wrong

  • What Went Well

    • Stable profitability execution: Adjusted EPS $1.90, flat YoY, with disciplined pricing/cost control offsetting volume pressure .
    • Performance Chemicals margin mix: EBIT up 4% YoY to $57M on higher gross profit/ton from cost savings and optimization despite 8% lower volumes .
    • Cash generation and capital returns: Q3 operating cash flow $249M and FCF $188M; returned $64M via $24M dividends and $40M buybacks .
    • CEO tone on execution: “disciplined execution in a highly dynamic environment… focused on managing pricing and costs and leveraging our global footprint” .

  • What Went Wrong

    • Revenue contraction: Net sales fell 9% YoY to $923M, reflecting weaker customer demand and tariff-related uncertainty; Reinforcement Materials volumes down globally 8% (APAC -11%, Americas -9%) .
    • Reinforcement Materials EBIT down 6% YoY to $128M on lower volumes in APAC and Americas .
    • Macro/tariff overhang: Management flagged lower volumes in both segments in 2H FY25 tied to tariff uncertainty and weaker macro, biasing FY EPS toward mid-to-low end of range .

Financial Results

Overall performance vs prior periods and estimates

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$1,016 $955 $936 $923
Diluted EPS ($)$1.94 $1.67 $1.69 $1.86
Adjusted EPS ($)$1.92 $1.76 $1.90 $1.90
Income from Operations ($USD Millions)$172 $155 $162 $167
Gross Profit ($USD Millions)$256 $235 $241 $244
Effective Tax Rate (%)25% 28% 32% 28%
Revenue Consensus Mean ($USD)—$997.1M*$1,020.2M*$954.7M*
Primary EPS Consensus Mean ($)—$1.772*$1.862*$1.830*

Values marked with * retrieved from S&P Global.

Segment breakdown

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Reinforcement Materials Sales ($M)$649 $611 $594 $573
Reinforcement Materials EBIT ($M)$136 $130 $131 $128
Performance Chemicals Sales ($M)$332 $311 $311 $320
Performance Chemicals EBIT ($M)$55 $45 $50 $57
Reinforcement EBITDA Margin (%)—24% 25% 25%
Performance EBITDA Margin (%)—21% 23% 24%

KPIs

KPIQ1 2025Q2 2025Q3 2025
Operating Cash Flow ($M)$124 $73 $249
Free Cash Flow ($M)$47 $1 $188
Capital Expenditures ($M)$77 $72 $61
Dividends Paid ($M)$24 $23 $24
Share Repurchases ($M)$42 $47 $40
Ending Cash ($M)$183 $213 $239
Net Debt/EBITDA (x)——1.3x
Liquidity ($B)——$1.4

Reinforcement Materials volume YoY (Q3 FY25 vs Q3 FY24): Global -8%; APAC -11%; EMEA +4%; Americas -9% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025$7.40–$7.80 (Q1) $7.15–$7.50 (revised Q2) ; Reaffirmed Q3 Lowered in Q2; Maintained in Q3
Operating Tax RateFY 202527%–29% (Q1) 27%–29% (Q2 & Q3) Maintained
Dividend (Quarterly)Ongoing$0.43 prior to Q2 $0.45 declared (Q2 increase); $0.45 payable Sep 11, 2025 (Q3) Raised in Q2; Maintained in Q3
Margin Assumptions2H FY25Maintain margins similar to Q2 (Q2 outlook) Q3 reaffirm EPS range with mid-to-low end bias at current demand; tariff-led demand could lift to higher end Qualitative update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 FY25)Trend
Tariffs / Macro demandQ1: FY25 outlook excluded potential tariff impacts ; Q2: Lowered EPS range on demand caution around tariff uncertainty Reaffirmed range; bias to mid–low end at current demand; upside if tariffs spur demand in Q4 Persistent headwind; path-dependent
Tire imports & Americas utilizationQ1: Americas RM volumes -1% due to higher tire imports from Asia ; Q2: Americas RM volumes -9% YoY CEO: Elevated tire imports depressed local production over multi-year; outlook depends on tariff/anti-dumping outcomes and majors revitalizing tier-two brands Stabilizing with potential improvement if trade actions bite
Performance Chemicals demand mixQ1: Volumes +8% YoY; demand reconnected in fumed metal oxides ; Q2: EBIT +61% YoY on volumes and price/mix EBIT +4% YoY with higher GP/ton from cost savings/optimization; volumes -8% on macro/tariff uncertainty Margin-focused mix offsets volume softness
Battery materials / technology—Launched LITX 95F conductive carbon for ESS batteries Building portfolio exposure
M&A / capacity—Agreed to acquire Bridgestone’s Mexico Carbon Manufacturing for $70M; enhances reinforcing carbons capacity Expanding RM footprint

Management Commentary

  • “Despite a challenging demand environment, I am pleased with our third quarter financial performance as we delivered Adjusted Earnings Per Share of $1.90… We remain focused on managing pricing and costs and leveraging our global footprint to adeptly respond to uncertainty from tariffs and a weaker global macroeconomic environment.” — Sean Keohane, President & CEO .
  • “During the third quarter, we delivered strong operating cash flow of $249 million and returned $64 million of cash to our shareholders… Net Debt to EBITDA ratio of 1.3x and liquidity of $1.4 billion.” .
  • Outlook tone: “We are reaffirming the range of our Adjusted Earnings Per Share guidance for fiscal 2025 of $7.15 to $7.50… at current demand levels, we would expect to be in the middle to lower end… If… tariffs were to translate into higher demand in the fourth fiscal quarter, we would expect to be higher in the guidance range.” .
  • Q&A color on Americas RM: “Elevated level of tire imports… impacted the region and had an effect of depressing the local production levels… directionally supportive [trade actions] to make local production more competitive.” — Sean Keohane .

Q&A Highlights

  • Americas RM utilization and tire imports: Management cited sustained pressure from elevated tire imports depressing local production; sees potential improvement tied to tariff/anti-dumping outcomes and renewed focus by majors on tier-two brands, but timing/magnitude uncertain .
  • Demand sensitivity to tariffs: While direct tariff cost impact is limited, management emphasized the indirect effect via customer demand/inventory posture, consistent with guidance bias commentary .
  • Margins: Management’s 2H framework assumes holding margins similar to Q2 despite lower volumes, reflecting pricing discipline and cost actions .

Estimates Context

  • Q3 FY25 vs S&P Global consensus: Adjusted EPS $1.90 vs $1.83 consensus* (beat); revenue $923M vs $955M consensus* (miss) .
  • Recent pattern: Q2 FY25 Adjusted EPS $1.90 vs $1.86 consensus* (beat); revenue $936M vs $1,020M consensus* (miss). Q1 FY25 Adjusted EPS $1.76 vs $1.77 consensus* (in line); revenue $955M vs $997M consensus* (miss) .

Estimates marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Execution remains solid in a tough tape: pricing discipline and cost actions are preserving EPS even as volumes soften; segment margins holding up (RM 25% EBITDA margin; PC 24%) .
  • Near-term narrative hinges on tariffs/trade: Americas utilization could recover if trade actions reduce imports; management’s FY EPS bias (mid–low end vs upside if demand lifts) makes tariff headlines a stock driver .
  • Mix and efficiency in Performance Chemicals offset volume pressure; watch fumed oxides and optimization benefits for incremental EBIT .
  • Strong FCF and balance sheet enable both growth and returns: $188M FCF in Q3, 1.3x net debt/EBITDA, $1.4B liquidity—supporting M&A (MXCB) and buybacks/dividends .
  • Structural capacity/footprint moves: Mexico acquisition adds reinforcing carbons capacity; integration and regulatory timing (3–6 months) are milestones to track .
  • Battery materials optionality: LITX 95F launch expands ESS exposure; while not yet needle-moving, it enhances long-term specialty portfolio positioning .
  • Estimate revisions: Expect modest downward revenue tweaks and stable-to-slightly higher EPS models given resilient margin mix and cost control; FY EPS range intact with demand sensitivity .