2 Rare Earth Stocks Set to Deliver Earnings Beat in Q3

The surging demand for rare earth magnets, critical for electrification, defense, and advanced technologies, is driving renewed investor interest amid U.S.-China trade tensions and global efforts to establish independent supply chains. MP Materials (MP) and USA Rare Earth (USAR) are highlighted as companies poised to beat earnings estimates, with MP Materials benefiting from strong NdPr production and a strategic shift to higher-value separated products, despite increased production costs. The U.S. government is actively supporting domestic rare earth production through investments and price support, such as $110 per kilogram for NdPr, further elevating prices following MP Materials' decision to halt shipments to China, while USA Rare Earth is developing a magnet manufacturing plant despite currently operating without revenue.

Analysis

Demand for rare earth magnets is surging across critical sectors like defense, automotive, AI, and clean energy, driving renewed investor interest. Geopolitical tensions, specifically U.S.-China trade dynamics, are accelerating efforts to establish independent supply chains, with the U.S. and Australia committing over $3 billion to critical mineral projects and the U.S. government directly investing in companies like MP Materials and offering NdPr price support at $110/kg. This context has kept Neodymium and Praseodymium (NdPr) prices elevated, further boosted by MP Materials' decision to halt shipments to China.

MP Materials (MP) is positioned for a potential earnings beat in Q3 2025, holding a +8.77% Earnings ESP and Zacks Rank 3. The company has demonstrated solid gains in NdPr and Rare Earth Oxide (REO) production volumes, reflecting process optimization and ramp-up initiatives. While a strategic shift towards higher-value separated rare earth products is expected to enhance NdPr sales and prices, it is also increasing production costs and SG&A expenses, leading to an anticipated wider loss of 14 cents per share.

USA Rare Earth (USAR) also shows strong potential for an earnings surprise, with an impressive +81.82% Earnings ESP and Zacks Rank 3 for Q3 2025, following a 38.5% surprise last quarter. The company is developing a rare earth magnet manufacturing plant in Oklahoma, projected to begin production in early 2026, and possesses mining rights in Texas. However, USAR currently generates no revenue and continues to incur operating losses due to high SG&A and R&D expenses, partially offset by increased interest income.

Key Decisions for Investors

• Monitor geopolitical developments and government support for domestic rare earth supply chains, as these are critical drivers for the sector's long-term viability and pricing power.
• Evaluate MP Materials' Q3 2025 earnings report for confirmation of its strategic shift to higher-value separated products and its impact on revenue growth versus cost pressures.
• Consider USA Rare Earth as a longer-term, higher-risk play, contingent on the successful ramp-up of its magnet manufacturing plant and eventual revenue generation from its mining assets.