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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals: while there's optimism about ethanol production expansion and potential record exports, financial metrics show declines in gross profit and net income. The Q&A reveals uncertainties in tax credits and partnerships, impacting sentiment. Positive elements include increased ethanol sales volume and strong cash reserves. However, lower selling prices and unclear guidance on tax credits and partnerships temper enthusiasm. Considering these factors, along with the lack of market cap data to gauge stock volatility, the stock price is likely to remain stable in the short term, resulting in a neutral rating.
Ethanol Sales Volumes 78.4 million gallons in Q3 2025 compared to 75.5 million gallons in Q3 2024, reflecting an increase in sales volume.
Average Selling Price for Ethanol $1.73 per gallon in Q3 2025 versus $1.83 per gallon in Q3 2024, showing a decrease in price.
Dried Distillers Grain Sales Volumes 160,000 tons in Q3 2025 compared to 170,000 tons in Q3 2024, with a decrease in average selling price from $147.14 per ton to $139.93 per ton.
Modified Distiller Grain Volumes 21,000 tons in Q3 2025 with an average selling price of $57.03 per ton.
Corn Oil Sales Volumes 27.4 million pounds in Q3 2025, up approximately 17% from the prior year, with an increase in average selling price of approximately 36%, leading to a 60% increase in sales revenue.
Gross Profit $36.1 million in Q3 2025 compared to $39.7 million in Q3 2024, primarily reflecting lower prices for ethanol and distiller grains.
SG&A Expenses $8.2 million in Q3 2025 compared to $8.4 million in Q3 2024, showing a slight decrease.
Interest and Other Income $3.2 million in Q3 2025 compared to $4.6 million in Q3 2024, reflecting lower rates and lower investments.
Income Before Taxes and Noncontrolling Interest $35.5 million in Q3 2025 compared to $39.5 million in Q3 2024, showing a decrease.
Net Income Attributable to REX Shareholders $23.4 million or $0.71 per diluted share in Q3 2025 compared to $24.5 million or $0.69 per diluted share in Q3 2024, reflecting a slight decrease in net income but an increase in earnings per share.
Cash, Cash Equivalents, and Short-term Investments $335.5 million at the end of Q3 2025, with no bank debt.
Ethanol Production Expansion: The One Earth Energy facility expansion to 200 million gallons per year is on track for completion in 2026, enhancing production capabilities and operational efficiency.
Carbon Capture and Sequestration: Invested approximately $155.8 million in carbon capture and ethanol expansion projects, with a revised combined budget of $220-$230 million. The EPA estimates the Class VI injection well permit application will be finalized in June 2026.
Ethanol Export Growth: U.S. ethanol exports are 14% higher than the first 8 months of 2024, with 2025 expected to set a new record for U.S. ethanol exports.
Financial Performance: Net income per share of $0.71, with $335 million in cash, cash equivalents, and short-term investments. Gross profit for Q3 was $36.1 million, reflecting lower ethanol and distiller grain prices.
Operational Efficiency: Strong margins achieved through managing input costs and timely execution. Corn oil sales revenue increased by approximately 60% due to higher volumes and prices.
Carbon Intensity and Tax Credits: Actively assessing carbon intensity scores to qualify for 45Z tax credits, expecting favorable outcomes. Engaged with independent experts for evaluation.
Long-term Positioning: Strategically positioning for long-term growth through ethanol production expansion, carbon sequestration, and leveraging 45Z tax credits.
Ethanol Price Volatility: The average selling price for ethanol decreased from $1.83 per gallon in Q3 2024 to $1.73 per gallon in Q3 2025, impacting gross profit.
Regulatory Delays: The EPA's estimated finalization of the Class VI injection well permit application for carbon capture is delayed until June 2026, potentially affecting project timelines.
Input Cost Variability: While corn supplies are currently favorable, any future disruptions or price increases could adversely impact operations and profitability.
Market Dependency: The company's performance is heavily reliant on sustained robust export demand for ethanol, which could be impacted by global market conditions or trade policies.
Carbon Intensity Assessment: The company is awaiting final guidance from the Treasury Department on the 45Z tax credit program, which introduces uncertainty in realizing near-term benefits.
Revenue Decline in Byproducts: Lower prices for dried distillers grains and modified distiller grains compared to the prior year have contributed to reduced gross profit.
One Earth Energy facility expansion: The expansion to 200 million gallons per year is on track for completion in 2026, which will significantly enhance production capabilities and operational efficiency.
45Z tax credits: The company is actively assessing operations to assign a carbon intensity score, expecting to qualify for credits below the threshold. Final guidance from the Treasury Department is awaited.
Carbon capture and sequestration initiative: The EPA estimates the Class VI injection well permit application will be finalized in June 2026. The company remains within the revised budget range of $220 million to $230 million for ethanol expansion and carbon capture projects.
Ethanol export demand: U.S. ethanol exports are expected to set a new record in 2025, with export volumes 14% higher than the first 8 months of 2024.
Corn production outlook: The USDA projects high corn production in South Dakota and Illinois for the 2025-2026 harvest season, which is expected to drive lower input prices.
Fourth quarter 2025 expectations: The company expects the fourth quarter to generate a higher net profit than the profitable fourth quarter of 2024.
2026 outlook: The company anticipates another year of growth and improved performance, supported by a strong balance sheet, no debt, and expanding business opportunities.
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The earnings call presents mixed signals: while there's optimism about ethanol production expansion and potential record exports, financial metrics show declines in gross profit and net income. The Q&A reveals uncertainties in tax credits and partnerships, impacting sentiment. Positive elements include increased ethanol sales volume and strong cash reserves. However, lower selling prices and unclear guidance on tax credits and partnerships temper enthusiasm. Considering these factors, along with the lack of market cap data to gauge stock volatility, the stock price is likely to remain stable in the short term, resulting in a neutral rating.
Despite some positive elements like increased ethanol sales volumes and a promising strategic plan for expansion, there are significant uncertainties, particularly around the 45Z tax credits and declining distiller grain sales. The Q&A revealed management's lack of clarity on key issues, which may cause investor concerns. The overall financial performance shows mixed results, with a slight decrease in net income but an increase in earnings per share. These factors combined suggest a neutral impact on the stock price.
The earnings call reveals a decline in key financial metrics, including gross profit and net income, despite increased sales volumes. While there is optimism about future projects and partnerships, unresolved issues such as the CI score and reliance on external approvals introduce uncertainty. The Q&A highlighted management's evasive responses, raising concerns about transparency. The 2-for-1 stock split is positive, but overall, the financial decline and uncertainties suggest a negative sentiment, likely leading to a stock price drop between -2% to -8%.
The earnings call reflects mixed signals: while there are positive aspects like ongoing share buybacks and stable ethanol demand, there are also several concerns. These include reduced financial metrics such as EPS and net income, potential regulatory risks, and unclear management responses. The market may react cautiously due to these uncertainties, leading to a neutral stock price movement in the short term.
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