This is an excerpt from an article I originally published on Seeking Alpha on November 13, 2011. Click here to read the entire piece.)
On Thursday evening, November 10, 2011, rare earth miner and producer Molycorp (MCP) reported strong earnings. There were no surprises given the strong guidance CEO Mark Smith delivered the previous week. Molycorp reported record margins and record revenues. Average sales price price increased 75% quarter-over-quarter to $131/kg of REO equivalent. The volatility in rare earth prices prevents MCP from providing earnings guidance, but it did slightly reduce production guidance to account for some equipment downtime. The market delivered its own surprise by rewarding the company for this news with a 14% one-day loss.
Seeking answers, I listened to the conference call and scanned through the 10Q. I did not note anything in the 10Q that is surprising or in direct conflict with the bullish thesis on MCP. The conference call was only 50 minutes long. MCP executives spent 33 minutes of that time reading the prepared materials. The analyst questions in the remaining 17 minutes revealed no new alarms. Indeed, I was surprised that the questioning did not last longer and was not more skeptical given the vigorous sell-off in the stock. I have to assume the analysts on the call were neither surprised nor disturbed by the results.
Perhaps the following episodes exposed some chinks in the armor…
{snip}
At $33.45/share, Molycorp is more of a bargain than ever. MCP’s forward P/E is 9.2 with strong earnings growth ahead…
{snip}
Be careful out there!
This is an excerpt from an article I originally published on Seeking Alpha on November 13, 2011. Click here to read the entire piece.)
Full disclosure: long MCP shares, calls, and puts; long MCP preferred