MP Materials Corp. MP posted a modest improvement in operating cash flow in the first quarter of 2026, though it still recorded a $1.9 million outflow compared with a $63 million outflow in the same quarter last year.
The year-over-year improvement was supported by higher product sales, as well as the $51 million received from the Department of War (DoW) for the Price Protection Agreement (PPA) income recognized in the fourth quarter of 2025, with no comparable cash inflow in the prior-year period. The company also received a $19 million from the 45X credit associated with its 2024 federal tax return.
Free cash flow remained negative at $79.3 million, though it improved from a $93.7 million outflow a year earlier. This follows an already weak 2025, when MP reported $155.8 million in operating cash outflows and $304 million in negative free cash flow.
MP’s last period of strong cash generation was in 2022, when it delivered $343.5 million in operating cash flow and $22 million in positive free cash flow, supported by elevated rare earth prices and strong demand conditions. Since then, cash flows have weakened significantly alongside falling rare earth prices and softer-than-expected demand for magnetic materials.
In 2023, cash flow from operations plunged 82% year over year to $62.7 million on lower prices and inventory builds to support its Stage II separations facilities as well as Stage III initiatives. The decline continued in 2024, with operating cash flow falling 79% to $13.3 million amid sustained price pressure and continued inventory accumulation as production of separated products ramped up. Notably, free cash flow has remained negative since 2023.
MP Materials is seeing higher production costs as producing separated products is more costly than producing rare earth concentrates. Selling, general and administrative expenses have also flared up as it expanded its workforce to support the downstream expansion. These factors have driven up operating expenses, keeping profits and cash flows under pressure.
Looking ahead, MP’s ongoing ramp-up of separated rare earth production at Mountain Pass, along with the expansion of magnetic precursor and magnet output at the Independence Facility, is expected to keep the costs elevated in 2026. Ongoing investment in downstream capabilities is also likely to keep SG&A expenses elevated, maintaining pressure on near-term profitability and cash flows.
On the positive side, NdPr production volumes are increasing as process optimization and ramp-up efforts progress. Combined with higher sales volumes and support from the DoW Price Protection Agreement, these factors could help partially offset margin pressure and gradually stabilize MP Materials’ cash flow profile after several challenging years.
MP’s Price Performance, Valuation & Estimates
MP Materials’ shares have gained 65% in a year compared with the industry’s 52.6% growth. Other names in the space, like Energy Fuels Inc. UUUU and USA Rare Earth Inc. USAR, have gained 194.9% and 93%, respectively.
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MP is trading at a forward 12-month price/sales multiple of 17.52X, a significant premium to the industry’s 1.49X. Energy Fuels and USA Rare Earth are trading at 22.09X and 51.85X, respectively.
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The Zacks Consensus Estimate for MP Materials’ 2026 earnings is pegged at 16 cents per share, indicating an improvement from the loss of 24 cents in 2025. The estimate for 2027 is $1.06 per share, indicating a 562.5% year-over-year improvement.
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The estimate for both 2026 and 2027 has, however, moved down in the past 60 days, as shown in the chart below.
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The company currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).