Molycorp Sales Trends Signal More Tough Times Ahead

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Molycorp, Inc. (NYSE: MCP) is a company which manages to keep disappointing and punishing just about any shareholder who dares to listen. The only major rare earth materials company in the United States reported a loss in the third quarter which was wider than expected. It also signaled that the weakness in its pricing remains in place as we saw in its last brutal secondary offering notes.

Molycorp lost some $65.5 million or $0.43 per share. A year ago that loss was only $11.5 million or $0.19 per share. If you exclude items, the adjusted loss climbed to -$0.27 per share from a loss of -$0.05 in the same period a year ago. Revenues were down by about one-fourth to $149.1 million from $205.2 million versus a year ago.

The good news is that the adjusted -$0.27 per share loss was slightly better than the -$0.29 expected by Thomson Reuters. The bad news is that the consensus estimate on revenue was $161 million.

What has happened is twofold. First is that Molycorp’s rare earth elements are not as in high demand as other rare earths, and then the pricing has been weak as well. International issues have also not been as present on the supply side as we had seen when rare earths were the huge craze. Growth in unit sales is being harmed by pricing. The trends just did not sound positive at all in the last news during the secondary offering. That being said, Molycorp shares closed down just over 1% at $4.76 and the shares were down even further at $4.67 in the after-hours session. The stock also hit a 52-week low of $4.61 on Thursday.

Things have become bad enough at Molycorp that we may cease to cover its earnings going forward. We just have too many trust issues with the company and we are not certain that its fate is anywhere close to a fraction of the past when many rare earth element bulls might have hoped in prior years.