Earnings Update: MP Materials Corp. (NYSE:MP) Just Reported And Analysts Are Trimming Their Forecasts

MP Materials Corp. (NYSE:MP) missed earnings with its latest second-quarter results, disappointing overly-optimistic forecasters. It was not a great statutory result, with revenues coming in 21% lower than the analysts predicted. Unsurprisingly, earnings also fell seriously short of forecasts, turning into a per-share loss of US$0.21. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for MP Materials

After the latest results, the consensus from MP Materials' eleven analysts is for revenues of US$168.4m in 2024, which would reflect a perceptible 3.0% decline in revenue compared to the last year of performance. Per-share losses are expected to explode, reaching US$0.39 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$189.6m and losses of US$0.26 per share in 2024. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

There was no major change to the consensus price target of US$21.54, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic MP Materials analyst has a price target of US$45.00 per share, while the most pessimistic values it at US$12.50. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the MP Materials' past performance and to peers in the same industry. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2024 compared to the historical decline of 10% per annum over the past three years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 5.1% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect MP Materials to suffer worse than the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at MP Materials. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$21.54, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple MP Materials analysts - going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for MP Materials that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.