Can Molycorp Outperform With a New CEO?
E = Earnings are Not Increasing Quarter over Quarter
It’s important to keep in mind that Molycorp, as it’s known today, launched its IPO in July of 2010.
To the company’s credit, revenues have grown consistently and tremendously since 2008. Molycorp’s average annual revenue growth rate since 2008 is over 550 percent.
|Revenue ($) in millions||2.14||7.09||35.16||396.83|
|Diluted EPS ($)||(0.36)||(0.72)||(0.81)||1.27|
Yearly earnings have not been as stable. Diluted EPS tanked until 2010, when Molycorp was able to reopen the Mountain Pass rare earth mine in California.
The company’s quarterly revenue performance is also a little shaky. Revenues fell in the fourth quarter of 2011 and the first quarter of 2012, but have picked up steam in the first two quarters of 2012, averaging about 60 percent growth.
|Quarter||Sep. 30, 2011||Dec. 31, 2011||Mar. 31, 2012||Jun. 30, 2012||Sep. 30, 2012|
|Revenue ($) in millions||138.05||132.90||84.47||104.58||205.60|
|Diluted EPS ($)||0.49||0.29||(0.07)||(0.71)||(0.19)|
Quarterly EPS increased over 73 percent in the most recent quarter, but still remains in negative territory. The company reported with its third quarter results: “Earnings decreased substantially from the prior year period as a result of lower selling prices and increased costs, offset in part by increased volumes and tax recoveries related to the settling of certain tax provisions.”
T = Trends Support the Industry in which the Company Operates
“With regard to global trends, output from China continues to be significantly reduced,” said former CEO Mark Smith in the company’s third-quarter earnings release. China currently supplies the majority — up to 90 percent — of the world’s rare earth elements. The country also consumes about 65 percent of the world’s rare earth output, a sharp increase from 25 percent 10 years ago.
“Chinese government officials are stepping up their efforts to enforce tougher environmental regulation and to curb illegal mining, and these efforts are putting pressure on production,” continued Smith…