MP Materials Earnings Are in Focus as Rare-Earth Rally Fades

A rare-earth magnet is inspected at MP Materials’ Independence facility in Fort Worth, Texas. Coming into Thursday trading, MP stock was up 252% year to date. (Courtesy MP Materials)

Key Points

• MP Materials reported a third-quarter loss of 10 cents per share on $53.6 million in sales, exceeding analyst expectations.
• MP Materials’ stock closed down 5.4% at $51.95 on Thursday, despite an initial premarket rise of 3.3%.
• The Defense Department’s deal with MP Materials in July boosted 2030 Ebitda estimates from $150 million to $750 million.

The past month has been wild for MP Materials and other rare-earth stocks. Threats of Chinese export controls, trade negotiations, government deals, capital raises, short seller reports, and corporate earnings added up to a brutal selloff.

It looked as if investors would finally get some relief. But after an initial rise on Thursday, shares closed back in the red.

Coming into Thursday trading, shares of MP Materials, the largest rare- earth producer in the Western Hemisphere, and aspiring rare earth miners Ramaco Resource and USA Rare Earths were down an average of 34% over the past month.

MP stock, however, was up a solid 3.3% in premarket trading on Thursday, only to close down 5.4% at $51.95. The S&P 500 and Dow Jones Industrial Average dropped 1.1% and 0.8%, respectively.

The pattern was the same for USA Rare Earth and Ramaco. USA Rare Earth stock was up 3.9% initially, but then slid, ending the day with a 6.2% loss at $15.82. Ramaco shares fell 2.2%% after rising almost 2% in premarket trading.

There isn’t much news to pin gains or losses on. Investors decided to stop selling, but then resumed selling later.

Earnings should affect Friday’s trading. Thursday evening, MP reported third-quarter results. They look solid. For the quarter, the company announced a per-share loss of 10 cents from sales of $53.6 million. Wall Street was looking for a 17-cent per-share loss from sales of $53 million.

What is more, MP expects to be profitable in the fourth quarter. Consensus expectations are for fourth-quarter earnings per share of 4 cents.

“MP Materials delivered another strong quarter, achieving record neodymium-praseodymium oxide production at Mountain Pass and record NdPr metal output at [the] Independence [facility],” said CEO James Litinsky in a news release. “This performance underscores the momentum we are building at a pivotal time for our Company and Country.”

MP stock was up 0.6% in after-hours trading, valuing the company at about $10 billion. That valuation makes $53 million in sales seem light. MP stock, however, is all about the future.

In July, the Defense Department announced a blockbuster deal with MP, which included an equity stake, price floor, and a guaranteed customer for rare-earth-magnet production capacity MP is building.

It was transformational. Wall Street estimates for 2030 earnings before interest, taxes, depreciation, and amortization, or Ebitda, have risen to about $750 million from $150 million.

China dominates rare-earth production and processing with an estimated 85% of global refining capacity. Repeated threats to restrict access to rare earths, which could upend manufacturing of everything from cars to fighter jets, led the U.S. government to make dramatic moves, like the MP deal, to break China’s near-monopoly.

That’s why, despite recent losses, the three rare-earth stocks were still up an average of about 150% year to date, coming into Thursday trading.

The outlook for the domestic rare-earth industry is bright, even while the rare-earth stock volatility has been extreme.

Write to Al Root at allen.root@dowjones.com