MP Materials (MP) easily surpassed first-quarter earnings and sales estimates on Thursday afternoon, giving MP stock a moderate lift in after-hours trade. The sole U.S.-based supplier of rare earth materials benefited from both higher pricing and volume.
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The somewhat subdued reaction to the strong report may be because MP stock investors are most excited about the next stages of the company’s plans. Currently, MP Materials produces rare earth concentrate that it ships to China for processing. However, MP’s Stage II operations now under construction at its Mountain Pass, Calif., site will process its concentrate into separated rare earth oxides that will be sold directly to end customers. Stage III involves turning NdPr into alloy flake and permanent magnets.
“We are making steady progress on our goal to restore the full rare earth supply chain to the United States, including our Stage II project at Mountain Pass and our initial Stage III magnetics facility in Texas,” CEO Jim Litinsky said in an earnings statement.
General Motors (GM) is the foundational customer of the magnetics facility as it tries to lock down the supply of permanent magnets for its Ultium battery EVs, including the Hummer, Silverado and Cadillac Lyriq. Permanent magnets only add about $100-$200 to the cost of an EV, yet they play an important role in optimizing motor performance and improving vehicle range.
On MP’s Q4 earnings call on Feb. 24, CEO Jim Litinsky explained the significance of Stage II and Stage III in financial terms.
Based on market prices at the time, Litinsky said MP Materials had reached an EBITDA run rate of $450 million-$500 million. Once Stage II processing and the Forth Worth, Texas, facility — the first of multiple potential Stage III magnetics plants — were up and running, EBITDA would double to $900 million-$1 billion.
Ahead of MP earnings, Deutsche Bank analyst Sathish Kasinathan kept a hold rating on MP stock due to “execution risks” related to Stage II. Still, Kasinathan hiked his MP price target to 45 from 37.
“We do see potential for re-rating of MP’s stock once the company successfully commissions its Stage II project,” he wrote.
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MP Materials Earnings
MP earnings surged 285% to 50 cents a share, beating forecasts by 9 cents. Revenue grew 177% to $166.26 million, crushing estimates of $137.49 million.
MP said realized prices per metric ton of rare earth oxide rose 37% from Q4 and 135% from a year ago. Production volume grew 6% on the quarter and 10% from a year ago.
MP Stock
Following the earnings report, MP stock rose 2.6% to 40.80, after slipping 2.1% in the regular session.
MP stock closed just below its 200-day line, a sign of stalled momentum. The downdraft has been swift since MP stock hit a record 60.19 on March 30, falling 34% since then.
MP Materials results follow booming earnings and guidance from lithium stocks Albemarle (ALB) and Livent (LTHM). Lithium is critical to EV batteries.
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Source: https://www.investors.com/news/mp-materials-earnings-top-estimates-mp-stock-rises/?src=A00220&yptr=yahoo