REX American Resources' Q3 2026: Contradictions Emerge on 45Z Tax Credit Program, Ethanol Exports, EPA Communication, and Ethanol Margins

Date of Call: December 4, 2025

Financials Results

• EPS: $0.71 per diluted share, compared to $0.69 in Q3 2024

Guidance:

• Q4 2025 expected to generate higher net profit than Q4 2024.
• Ethanol sales for next quarter expected to outperform last year's fourth quarter.
• One Earth Energy expansion to 200M gallons/year on track for completion and operation in 2026.
• EPA Class VI injection well permit estimated to be finalized in June 2026.
• $155.8M invested to date; combined expansion and CCS project budget remains $220M–$230M.
• Positioning to capture 45Z tax credits pending Treasury guidance; potential retroactive recognition under consideration.

Business Commentary:

• Ethanol Production and Expansion:
• REX American Resources reported ethanol sales volumes of 78.4 million gallons in Q3 2025, compared to 75.5 million gallons in Q3 2024.
• The expansion of ethanol production at the One Earth facility is on track for completion and operation in 2026.

• Growth was driven by supportive ethanol industry dynamics, strong export volumes, and crush spreads.

  

• Financial Performance and Cash Position:

• Net income per share was $0.71, reflecting a strong performance due to exceptional execution in managing input costs and achieving strong margins.
• REX maintained a strong balance sheet with approximately $335 million in cash, cash equivalents, and short-term investments.

• The strong financial position allowed for continued investment in capital projects, including the expansion and carbon capture of the One Earth Energy facility.

• Carbon Intensity Score and 45Z Tax Credits:

• REX is actively engaged in assessing its operations for carbon intensity scores to potentially begin earning 45Z tax credits.
• The company is hopeful to receive credits this year but awaits final guidance from the treasury department.

• The potential benefits from 45Z tax credits are expected to enhance earnings as more gallons qualify under the program.

• Export Demand and Corn Supply:

• U.S. ethanol exports were approximately 10% ahead of the 2024 pace by August, with a strong momentum that is expected to set a new record for 2025.
• REX benefits from reliable corn supplies, with projected high corn production in South Dakota and Illinois for the 2025 and 2026 harvest seasons.
• The supportive industry dynamics and strong corn production forecasts continue to favor REX's business operations.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted strong results: "net income per share of $0.71" and "ended the third quarter with cash... $335.5 million"; called Q3 "exceptionally strong" and said One Earth expansion is "on track for completion in 2026" while expecting Q4 to outperform prior year.

Q&A:

• Question from Christopher Degner (Water Tower Research LLC): Good morning, and it looks like a great quarter. I just wanted a couple of questions for you. And kind of curious of your thoughts on key hurdles and timing as you look forward to the 45Z tax credit program. And if you can give us any incremental color on when we could expect some more updates on that?
  Response: Treasury guidance not yet issued; working with experts on CI score and prevailing wage calculations; hope to provide quantification next quarter but not disclosing amounts now.

• Question from Christopher Degner (Water Tower Research LLC): Sure. Okay. And then if you step back and think about some of the fundamentals of the industry, like it -- I'd be curious like your view on like the impact of tariffs and then crack spreads as you look forward into 2026. I know it's hard to forecast, but just curious on your view?
  Response: Tariffs initially disrupted Mexico/Canada flows, but ethanol exports are rising (Jan–Aug exports ~$1.4B vs $1.2B LY); strong corn production should lower input costs in 2026, though corn oil and DDG see some pressure.

• Question from Christopher Degner (Water Tower Research LLC): We do. My family has a farm in Iowa, and it's been a good year. So it's -- as you think through like the carbon sequestration project that you're looking at, like -- how is like the permitting process going with the pipeline? And like is there -- I don't want to put you on the spot, but is there any other key hurdles that you can -- that had -- that you could see through with the Illinois state government?
  Response: ICC moratorium runs through July 1; public hearings underway but no clear application timeline; REX already holds easements for its 6-mile pipeline designed to avoid the Mahomet Aquifer.

• Question from Mason Bourne (AWH Capital): Just a couple for me. Stuart, I guess, in your prepared remarks, you mentioned recognizing benefits under 45Z and it sounds like you're not yet still sort of assessing where that -- where that score is to start and then where it can go from there. But is it fair to say that you believe you're going to be positively generating credits before the indirect land use change occurs at January 1, and then that would be an incremental step after that? Or is it still too early to say?
  Response: We are working diligently but regulations aren't published; we hope to obtain credits this year and potentially recognize them retroactively, but cannot guarantee any credits until guidance is finalized.

• Question from Mason Bourne (AWH Capital): And then second for me on -- I know it's early on this as well, but ADM recently entered into an agreement with Google on some of their excess capacity. I know you guys are planning to have plenty of excess capacity in your carbon capture wells even on one alone, but potentially in all 3, if you have them operating. Just wondering if you could provide any thoughts there on your thinking there and any time line around -- obviously, I assume you get your operation online first. But just any thoughts on potential for partnerships or what that could look like?
  Response: Focus is on getting Well #1 permitted and pipeline installed; expect to pursue third-party sequestration contracts thereafter and have had inbound interest, but will not finalize agreements until Class VI permit and infrastructure are secured.

Contradiction Point 1

45Z Tax Credit Program Status and Timeline

It involves differing levels of clarity and optimism regarding the status and impact of a significant tax credit program, which could affect the company's financial outlook and strategic planning.

What are the key hurdles and timing for the 45Z tax credit program? Are there any recent updates? - Christopher Degner (Water Tower Research LLC)

2026Q3: The treasury has not yet issued guidelines, and we await this information. We are reviewing data with experts for accurate calculations. Next quarter, we hope to provide more details on expected tax credits. - Zafar Rizvi(CEO)

Which specific deregulation measures does the Trump administration plan to implement to support your business growth? - Peter Gastreich (Water Tower Research)

2025Q1: The Big Beautiful Bill currently includes 45Q and 45Z, extending 45Z's expiration date. - Zafar Rizvi(CEO)

Contradiction Point 2

Ethanol Exports and Tariffs Impact

It involves the company's outlook on the impact of tariffs and ethanol exports, which are key factors in determining financial performance and market strategies.

How do you assess the impact of tariffs and crack spreads for 2026? - Christopher Degner (Water Tower Research LLC)

2026Q3: Initially, tariffs impacted exports to Mexico and Canada. But now, ethanols are traded profitably to these regions based on strong demand and overall global supply, especially in the ethanol deficit regions. - Zafar Rizvi(CEO)

What is the outlook for your co-products in the second half of the year? - Peter Gastreich (Water Tower Research)

2025Q2: We anticipate a better performance in Q3 compared to the first two quarters, with a bumper crop of corn in Illinois and Iowa. Ethanol exports are expected to rise, with potential trade upside once tariff-related trade issues are resolved. - Zafar A. Rizvi(CEO)

Contradiction Point 3

EPA Communication and Dialogue

It involves changes in communication with the EPA, which is crucial for regulatory compliance and project timelines.

How do tariffs and crack spreads impact your 2026 outlook? - Christopher Degner (Water Tower Research LLC)

2026Q3: When the new administration took over, communication with EPA stopped. Now, it has started again. - Zafar Rizvi(CEO)

Have you had direct dialogue with the EPA on Class VI well permitting since the new administration took office? Has there been any change in that dialogue? - Jordan Levy (Truist Securities)

2025Q4: We've had two conversations with EPA in March, and we believe we can address previously raised questions. The communication is now open and flowing well. - Zafar Rizvi(CEO)

Contradiction Point 4

Tax Credit Program Uncertainty

It highlights differing levels of clarity and optimism regarding the status and impact of a significant tax credit program, which could affect the company's financial outlook and strategic planning.

What are the key hurdles and timing for the 45Z tax credit program? Are there any updates? - Christopher Degner (Water Tower Research LLC)

2026Q3: The treasury has not yet issued guidelines, and we await this information. We are reviewing data with experts for accurate calculations. Next quarter, we hope to provide more details on expected tax credits. - Zafar Rizvi(CEO)

What specific deregulation measures from the Trump administration would help smooth your runway? - Peter Gastreich (Water Tower Research)

2025Q1: The Big Beautiful Bill currently includes 45Q and 45Z, extending 45Z's expiration date. - Zafar Rizvi(CEO)

Contradiction Point 5

Ethanol Margin Trends

It involves differing perspectives on the trajectory of ethanol margins, which are crucial for assessing the company's financial performance and market outlook.

What's your outlook for tariffs and crack spreads in 2026? - Christopher Degner (Water Tower Research LLC)

2026Q3: Ethanol margins are cautious but positive for the second quarter. - Zafar Rizvi(CEO)

How are ethanol margins trending as summer approaches? - Peter Gastreich (Water Tower Research)

2025Q1: Ethanol margins are cautious but positive for the second quarter. Strong corn yields are expected to boost profits. - Zafar Rizvi(CEO)