Cabot Shares Fall On Analyst Downgrade

BOSTON (AP) — Shares of Cabot Corp. tumbled Friday after an analyst downgraded his rating on the specialty chemicals manufacturer over concerns about the lagging market for carbon black, an ingredient in rubber compounds.

The Boston-based company's shares fell more than 10 percent in early trading. Its carbon black product is an ingredient used largely in replacement tires and new vehicle tires.

JP Morgan analyst Jeffrey J. Zekauskas cut his rating to "Neutral" from "Overweight" and slashed his price target by more than half to $8 from $17. That price target implies downside of 22.3 percent from its closing price Thursday of $10.29.

Zekauskas told clients in a research note he expects Cabot to post a loss in the second quarter and revised his 2010 fiscal year earnings projection to 90 cents per share from a previous view of $1.60 per share.

"It is easy to imagine Cabot earning at historical levels under more normal demand conditions two or three years out ...," Zekauskas wrote. "However, the magnitude of the near-term demand decreases could also lead to price-cutting behavior in a global carbon black industry and a more extended downturn from a profit standpoint."

Cabot's shares fell $1.10, or 10.7 percent, to $9.19 in midday trading. The stock has traded between $7.97 and $33.72 over the past year, and is off nearly 33 percent since January.