Winners & Losers

Return to Article

Cabot Shares Plunge As Analyst Sees Dividend Cut

The Associated Press

NEW YORK (AP) — Shares of Cabot Corp. tanked nearly 13 percent Friday after a JPMorgan analyst wrote that the specialty chemical and materials maker will likely cut its dividend in the wake of slumping results.

Analyst Jeffrey J. Zekauskas wrote that the company's annual dividend of 72 cents could be reduced, since it is "much in excess" of the 30 cents per share he estimates the company will lose in the 2009 fiscal year.

What's more, he said free cash flow is expected to be negative in the 2010 fiscal year, even before the dividend payment.

"Accordingly," Zekauskas wrote, "we think there is a reasonable chance of a dividend cut."

That sent the company stock down sharply Friday. Shares dropped as much as $2.35, or 14.9 percent, to $13.46 in afternoon trading on nearly three times the average trading volume.

Zekauskas noted that the company will struggle to keep pace with the market, as raw material costs rise with higher crude oil prices. Demand for the firm's carbon black product, a sort of thickening agent used to reinforce items such as tires and plastics, also remains weak, he wrote.

He lowered his third quarter estimate to a loss of 20 cents per share from earnings of 13 cents per share. He also reduced his fiscal year estimates, predicting a loss of 30 cents per share in 2009 and earnings of 80 cents per share in 2010.

Analysts surveyed by Thomson Reuters expect the company to lose 17 cents per share in the third quarter and 23 cents per share in the 2009 fiscal year.

Cabot officials did not immediately return calls seeking comment.