MP's Operating Cash Flow Turns Positive in Q2: More Upside Ahead?

MP Materials Corp. MP returned to positive operating cash flow in the second quarter of 2026 after five consecutive quarters of declines. Operating cash flow was $6.8 million against an outflow of $3.6 million in the year-ago quarter. 

However, free cash flow was a negative $223.5 million in the second quarter compared with a negative $20.5 million in the year-ago quarter. This was due to a sharp increase in capital expenditures, which rose to around $230 million in the second quarter from $16.8 million in the year-ago quarter. The second quarter was particularly capital-intensive, following $77.4 million of spending in the first quarter of 2026.

Capital expenditures are related primarily to machinery, equipment and assets under construction to support both the company’s Independence Facility and 10X Facility, as well as various projects at Mountain Pass, including the heavy rare earth elements (HREE) facility and the chlor-alkali facilities.

Backed by the improvement in the second quarter, MP Materials generated $4.9 million of operating cash flow in the first six-month period of 2026, an improvement from the outflow of $66.9 million in the year-ago period. This was supported by higher product sales, $93.3 million received from the Department of War (DoW) under the Price Protection Agreement (PPA) and $19 million related to the 45X credit claimed on the company’s 2024 federal tax return. These benefits were partly offset by the absence of a $50 million deferred-revenue inflow recorded in the prior-year period related to a prepayment for magnetic precursor products.

Free cash flow remained negative at $302.8 million in the first half of 2026 compared with a negative $114 million a year earlier. Capital expenditures surged to approximately $307.7 million from $47.3 million in the year-ago period. 

MP Materials had last reported both positive operating and free cash flow in 2022, at $343.5 million and $22 million, respectively, benefiting from elevated rare earth prices and strong demand. Cash generation weakened sharply thereafter. Operating cash flow fell 82% to $62.7 million in 2023 and another 79% to $13.3 million in 2024, reflecting lower rare earth prices, inventory accumulation and investments to support downstream expansion. In 2025, the company reported $155.8 million in operating cash outflows and negative free cash flow of $304 million. 

MP Materials is seeing higher production costs as producing separated products is more costly than producing rare earth concentrates. Selling, general and administrative expenses have also increased as it expanded its workforce to support the downstream expansion. These factors have driven up operating expenses, keeping profits and cash flows under pressure.

Looking ahead, MP’s ongoing ramp-up of separated rare earth production at Mountain Pass, along with the expansion of magnetic precursor and magnet output at the Independence Facility, is expected to keep costs elevated in 2026. Ongoing investment in downstream capabilities is also likely to keep SG&A expenses elevated, maintaining pressure on near-term profitability and cash flows. 

On the positive side, neodymium-praseodymium (NdPr) production volumes are increasing as process optimization and ramp-up efforts progress. Higher sales volumes and support from the DoW PPA could help partially offset margin pressure and gradually stabilize MP Materials’ cash flow profile.

MP’s Price Performance, Valuation & Estimates

MP Materials’ shares have declined 20.6% in a year against the industry’s 51.6% growth. Other names in the space, like Energy Fuels Inc. UUUU and USA Rare Earth Inc. USAR, have gained 36.1% and 15.6%, respectively.

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MP is trading at a forward 12-month price/sales multiple of 15.43X, a significant premium to the industry’s 1.41X. Energy Fuels and USA Rare Earth are trading at 19.19X and 9.44X, respectively.

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The Zacks Consensus Estimate for MP Materials’ 2026 earnings is pegged at 12 cents per share, indicating an improvement from the loss of 24 cents in 2025. The estimate for 2027 is 91 cents per share, indicating a 658.3% year-over-year improvement.

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The estimate for both 2026 and 2027 has, however, moved down in the past 60 days, as shown in the chart below.

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The company currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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