Key Points
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USA Rare Earth beat on earnings last night, but losses were still enormous.
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The company has successfully begun manufacturing and selling rare earth magnets.
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USA Rare Earth (NASDAQ:USAR) stock tumbled 10.8% through 11:35 a.m. ET Tuesday despite beating on earnings last night — and coming within a couple pennies of breaking even besides!
Analysts didn’t expect USA Rare Earth to earn a profit in Q3 — and it didn’t. Still, the forecast for $0.13 per share in losses was much more pessimistic than the $0.02 per share loss that USA Rare Earth actually turned in.
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USA Rare Earth Q3 “earnings”
So that was the good news. Now here’s the bad:
USA Rare Earth reported $3 million in revenue in Q3, but its losses dwarfed its revenue. Total net losses from operations were $141.4 million — nearly 9x the operating loss one year ago, and cash flow was negative $143.7 million.
Operating and R&D costs both surged in the quarter, and the only reason USA Rare Earth got as close as it did to reporting a break-even net profit was that it reported $148 million in “other income,” which wasn’t clearly explained in the earnings release.
What’s next for USA Rare Earth stock?
Looking ahead, USA Rare Earth noted that its magnet facility in Stillwater, Oklahoma, has begun making commercial magnet sales, and the company is beginning construction of another magnet factory in Blacksburg, S.C.
2027 should see a second magnet production line open in Stillwater, as well as additional rare-earth production from the company’s mines. There’s no firm guidance on sales or earnings for the coming year, but investors can probably expect some upward movement in revenue — alongside continued large losses for the business.
USA Rare Earth remains a speculative stock. Gauge your risk tolerance accordingly.
Should you buy stock in USA Rare Earth right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
