By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
REX's FY2025 results showed strong operational and financial performance, but future earnings are dependent on EPA permitting and commodity price fluctuations. The One Earth expansion and carbon capture project could significantly boost earnings, but there are risks associated with oversupply and policy changes.
Risk: Oversupply risk and potential margin compression if ethanol prices fall
Opportunity: Premium pricing for low-carbon ethanol in LCFS markets, contingent on EPA permitting and validation
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
REX sold a record 290.0 million gallons of ethanol in FY2025 and reported net income attributable to shareholders of $83.0 million (diluted EPS $2.50), with the fourth quarter aided by recognition of approximately $28 million in 45Z tax credits.
The One Earth Energy expansion to 200 million gallons annual capacity is nearing completion and expected to be fully operational in FY2026, while the carbon capture facility is complete but cannot add credits until the Class VI well and pipeline permits are obtained.
REX finished FY2025 with $375.8 million in cash and short-term investments and no bank debt, remains within its $220–$230 million project budget after investing about $166 million, and expects a profitable start to FY2026 supported by strong exports and an estimated $0.10/gallon current benefit from 45Z.
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REX American Resources (NYSE:REX) executives highlighted record ethanol sales volume, an earnings boost from the federal 45Z tax credit, and continued progress on a major capacity expansion project during the company’s fourth-quarter and full fiscal year 2025 earnings call.
Management characterized fiscal 2025 as an “exceptional” and “transformative” year, pointing to strong export demand, operational execution, and a balance sheet with substantial cash and no bank debt. The company also discussed the status of its carbon capture and sequestration (CCS) initiative at the One Earth Energy facility, which remains subject to permitting timelines.
Chief Financial Officer Doug Bruggeman said REX posted an all-time high in ethanol sales volume for fiscal 2025, with 290.0 million gallons sold, slightly above 289.7 million gallons in fiscal 2024. Fourth-quarter ethanol volume was 70.1 million gallons, down from 74.6 million gallons in the year-ago quarter. Average consolidated ethanol selling price was approximately $1.74 per gallon for the full year and $1.72 per gallon in the fourth quarter.
Co-product performance was mixed. Dried distillers grains (DDGs) sales volume totaled 612,000 tons for fiscal 2025, down 3% from 632,000 tons in fiscal 2024, and fourth-quarter DDG volume declined about 9% year over year to roughly 151,000 tons. Average DDG selling price was approximately $144.06 per ton for the year and $147.25 per ton in the fourth quarter.
Modified distillers grains volume increased to 81,900 tons in fiscal 2025 from about 70,000 tons in fiscal 2024. Fourth-quarter modified distillers grains volume was about 19,700 tons, up roughly 1% year over year. Average selling price for modified distillers grains was approximately $65.82 per ton for the year and $67.92 per ton in the fourth quarter.
Corn oil volumes increased sharply, with fiscal 2025 sales of approximately 97.0 million pounds versus 88.1 million pounds in fiscal 2024. Fourth-quarter corn oil volume rose 7% to about 25.2 million pounds. The average selling price for corn oil was approximately $0.54 per pound for both the full year and the fourth quarter.
Gross profit for fiscal 2025 was $93.7 million, up from about $91.5 million in fiscal 2024. Fourth-quarter gross profit rose to $28.9 million from $17.6 million a year earlier, which Bruggeman attributed primarily to improved ethanol pricing and reduced corn costs.
SG&A expense increased to $32.6 million in fiscal 2025 from $27.1 million in fiscal 2024. Fourth-quarter SG&A rose to about $12.3 million from $6.2 million in the prior-year quarter, primarily due to higher incentive bonuses tied to profitability.
Interest and other income was $15.0 million for fiscal 2025, down from $19.2 million in fiscal 2024. For the fourth quarter, interest and other income was about $4.5 million versus $4.2 million in the year-ago period.
Income before taxes and non-controlling interest for fiscal 2025 was approximately $88.6 million, down about 5% from $92.9 million in fiscal 2024, while fourth-quarter income before taxes and non-controlling interest increased to about $27.4 million from $17.9 million.
Net income attributable to REX shareholders was $83.0 million for fiscal 2025, compared with $58.2 million in fiscal 2024. Fourth-quarter net income attributable to shareholders increased to $43.7 million from $11.1 million in the year-ago quarter.
Bruggeman said the fourth quarter benefited from the recognition of approximately $28 million in 45Z tax credits “as the regulations became more clear.” In the Q&A, management clarified that the $28 million figure referenced the full fiscal year 2025 amount. Diluted earnings per share for fiscal 2025 reached an all-time high of $2.50, up from $1.65 in fiscal 2024. Fourth-quarter diluted EPS was $1.32 versus $0.31 a year earlier.
On the call, REX executives said they completed assessments with multiple independent experts to establish carbon intensity (CI) scores across facilities, and that the company qualified for 45Z “with the purchase of energy credits.” In response to an analyst question, management indicated the current benefit is about $0.10 per gallon and applies across volumes.
One Earth expansion and CCS: budget and timelines
Executives emphasized continued progress on expanding production capacity at the One Earth Energy ethanol facility to 200 million gallons per year. Chief Executive Officer Zafar Rizvi said the expansion project is nearing completion, with testing and commissioning expected to begin upon completion and the facility becoming fully operational in fiscal 2026.
Rizvi also provided an update on the company’s CCS initiative, stating that the carbon capture facility is complete, but the project is “awaiting permitting for the Class VI well and associated carbon dioxide connector pipeline.” The company said it remains engaged with the U.S. Environmental Protection Agency and the Illinois Commerce Commission during the permitting process.
In Q&A, management said the EPA website timeline for the Class VI permit has moved to September, but the company described being at the final stage of technical review and said it has provided requested documents. Rizvi also cautioned that the company does not expect to capture additional 45Z credits due to carbon capture in 2026, noting that timing depends on permits.
As of fiscal year-end 2025, REX had invested approximately $166 million in its carbon capture and ethanol expansion projects combined and said it remains within its previously stated total budget range of $220 million to $230 million.
Market environment and outlook themes for fiscal 2026
Rizvi framed the company’s fiscal 2026 priorities around “profit, position, and policy.” He said REX has delivered 22 consecutive quarters of profitability and expects a profitable first quarter of fiscal 2026. He also cited expanded capacity, continued focus on the core business, and expected 45Z contributions as tailwinds.
On demand, management pointed to strong ethanol exports, with Rizvi stating that U.S. export volumes reached record levels again in 2025 and that the strength has continued into 2026. In response to a question on tariffs, executives said they have seen no impact on ethanol exports and cited Canada as a key export destination. They also discussed Brazil’s import activity early in calendar 2026 as part of broader export market commentary.
On inputs, Rizvi said corn supplies remain favorable, supporting “manageable input cost” and “expected healthy crush margins.”
On the policy front, management said the 45Z tax credit provides meaningful near-term benefits through 2029 and that CCS could significantly increase credits by further reducing carbon intensity. Executives did not disclose a specific CI score improvement, though they characterized the potential reduction as significant and, in response to another question, suggested CCS could reduce CI scores by “at least 30-35 points more.” They also discussed E15, with Chairman Stuart Rose saying nationwide E15 would be beneficial but that he does not expect it to happen, while anticipating continued adoption of E15 pumps by independent retailers.
REX ended fiscal 2025 with cash, cash equivalents, and short-term investments of $375.8 million, up from $359.1 million at fiscal year-end 2024, and Bruggeman said the company finished the year with no bank debt.
About REX American Resources (NYSE:REX)
REX American Resources Corp. is a diversified agribusiness and renewable energy company headquartered in Kansas City, Missouri. Founded in 2005 through a reorganization of existing agricultural interests, the company focuses on two primary business segments: fuel ethanol production and specialty ingredient solutions. REX American Resources leverages its integrated operations to supply clean-burning fuel, animal feed co-products and sweetener ingredients to a broad customer base in North America and beyond.
In its alcohol fuels segment, the company operates an anhydrous ethanol production facility in Colwich, Kansas.
Four leading AI models discuss this article
"REX's FY2025 earnings were inflated by a $28M one-time 45Z tax credit recognition; normalized run-rate earnings are ~25% lower, and future upside hinges entirely on permitting timelines and policy stability neither company nor market controls."
REX (NYSE:REX) reported $2.50 diluted EPS on record 290M gallon ethanol sales, but $28M of FY2025's $83M net income came from 45Z tax credits recognized in Q4 as 'regulations became more clear'—a one-time accounting event, not recurring operations. Strip that out: underlying earnings ~$1.87/share. The One Earth expansion to 200M gallons capacity is 'nearing completion' but remains unfinished; carbon capture upside is entirely contingent on EPA Class VI permitting (now Sept timeline, per management). The $0.10/gallon 45Z benefit is real but policy-dependent through 2029. Strong balance sheet ($375.8M cash, zero debt) and export tailwinds are genuine, yet the article conflates tax credit timing with operational momentum.
If 45Z credits face legislative rollback or tighter IRS interpretation post-2026, or if the One Earth ramp disappoints, REX's normalized earnings power drops sharply—potentially to ~$1.20–$1.50/share, making current valuation (if priced on the $2.50 headline number) unsustainable.
"REX is successfully using federal tax credits to bridge the gap toward a massive 200-million-gallon capacity expansion while maintaining a debt-free balance sheet."
REX's FY2025 results are a masterclass in balance sheet management, ending with $375.8M in cash and zero debt while funding a massive $230M expansion. The 'beat' is largely driven by the $28M 45Z tax credit recognition, which added roughly $0.85 to EPS. While ethanol volumes were slightly down in Q4, the 45Z credit provides a massive floor, effectively subsidizing margins by $0.10/gallon. The real catalyst remains the One Earth expansion to 200M gallons; if they hit the FY2026 operational target, they are scaling into a high-export environment with lower corn input costs. However, the market is pricing in CCS (Carbon Capture) success that is currently stalled by EPA bureaucracy.
The entire bull case rests on the 45Z tax credit and EPA Class VI permits; if the EPA pushes the September timeline further or if 45Z regulations are tightened, REX's 'transformative' CCS investment becomes an expensive, non-productive asset.
"REX is in a strong liquidity and capacity position with a meaningful near-term earnings tailwind from 45Z, but its longer-term re-rating depends critically on CCS permitting and durable ethanol margins rather than one-off tax-credit recognition."
REX’s Q4/fiscal 2025 showed clear operational and financial strength: record ethanol volumes (290.0M gal), $83M net income, $375.8M cash and no bank debt, plus a near-term ~$0.10/gal benefit from 45Z that management pegs at roughly $28M for the year. The One Earth 200M-gal expansion and a finished CCS plant are catalysts—if permits arrive—because they could materially raise 45Z credits and throughput. However, the company’s near-term earnings are materially propped up by tax-credit recognition and favorable corn/external demand; margins remain exposed to commodity swings, export volatility, and permit/calendar risk for realizing CCS-related upside.
These results are skewed by a one-time/interpretive recognition of 45Z credits and an unfinished permitting process for CCS—if permits stall or regulators reclassify credits, EPS could decline sharply and the expansion’s return profile would be delayed.
"REX's debt-free $376M cash pile and 25%+ capacity expansion position it to capture export tailwinds and $0.10/gal 45Z for sustained FY26 profitability even if margins moderate."
REX delivered FY25 record 290M gallons ethanol sales and $2.50 diluted EPS ($83M net income), juiced by $28M 45Z credits amid $1.74/gal avg price and favorable corn costs driving $93.7M gross profit (up 2%). Balance sheet shines with $375.8M cash/short-term investments, zero debt, and $166M capex spent within $220-230M budget for One Earth expansion (to 200M gal capacity by FY26) plus completed CCS. $0.10/gal 45Z benefit and strong exports (record U.S. volumes) set up profitable FY26 Q1. Co-products like corn oil up 10% volume support margins, but SG&A rose on bonuses.
Ethanol crush margins remain notoriously volatile—industry expansions (not just REX) risk oversupply crushing prices below $1.70/gal, while CCS permitting delays (EPA timeline now Sept 2026) could forfeit multi-year 45Z uplift worth 30-35 CI points.
"REX's earnings resilience depends on 45Z credits masking commodity margin compression, not on operational strength."
Grok flags oversupply risk—the real vulnerability nobody quantified. If ethanol prices fall to $1.60–$1.70/gal (well within historical range), REX's $0.10/gal 45Z benefit gets neutralized by margin compression. The 290M gallon 'record' masks that industry capacity is rising faster than demand. One Earth's 200M-gallon ramp happens into a potentially softer pricing environment. That's the tail risk everyone's dancing around.
"The One Earth expansion is a margin-expansion play via Carbon Intensity reduction, not just a volume-based commodity bet."
Claude and Grok are focusing on supply, but they are ignoring the specific quality of One Earth’s expansion. REX isn't just adding volume; they are targeting a lower Carbon Intensity (CI) score. If the EPA Class VI permit hits in September, REX moves from a commodity ethanol play to a high-margin 'green' fuel provider. The $0.10/gallon 45Z credit is the floor, but the real upside is the premium pricing for low-CI ethanol in LCFS markets like California.
"Low-CI premiums are not guaranteed—validation, market access, and regulatory interpretation create material execution and policy risk."
Gemini assumes a clean path from lower CI to premium LCFS pricing — I disagree. Achieving verified low-CI and monetizing it requires third-party lifecycle validation, sustained LCFS price spreads, and dependable logistics into markets like CA. Plus, CCS permanence and EPA interpretations can retroactively alter 45Z eligibility. In short, premium capture is operationally and policy-risky; investors shouldn’t conflate potential CI upside with guaranteed margin transformation.
"Competitor low-CI expansions erode REX's LCFS premium potential, limiting it to ~$0.10/gal amid oversupply."
ChatGPT rightly flags LCFS validation hurdles, but underplays REX's edge: One Earth targets 50-60 CI score via CCS, vs. industry avg ~85-90, enabling $0.15-0.25/gal credits in CA even post-oversupply. Yet tying to my oversupply point—parallel expansions by Green Plains, ADM mean low-CI becomes table stakes by FY27, capping REX's premium at $0.10/gal max without logistics moat.
REX's FY2025 results showed strong operational and financial performance, but future earnings are dependent on EPA permitting and commodity price fluctuations. The One Earth expansion and carbon capture project could significantly boost earnings, but there are risks associated with oversupply and policy changes.
Premium pricing for low-carbon ethanol in LCFS markets, contingent on EPA permitting and validation
Oversupply risk and potential margin compression if ethanol prices fall