REX's 45Z Tax Credit Windfall: A Record Quarter Fueled by Policy and Low Corn Costs

Ethanol producer's first-quarter EPS hits record as 45Z credits lift gross profit; carbon-capture permitting looms.

REX · Earnings Call · 2026-05-28

A Record Quarter, Powered by Policy

REX American Resources delivered its best first quarter ever on a per-share basis, a feat Stuart Rose attributes to the team's “operational excellence and strategic discipline” — Stuart A. Rose, Executive Chairman · 2026-05-28. The numbers tell the story: Gross profit more than doubled to $29.1M from $14.3M a year ago, while net income nearly doubled to $18.5M, or $0.56 per share. The key driver: production tax credit income of $7.5M recognized in the quarter, now reported as operating income from consolidated plants—a change in accounting principle that makes the credit's contribution explicit. The credit, tied to the 45Z program, is still being booked conservatively at $0.10 per gallon, but management sees room to grow. Zafar Rizvi reiterated that once the carbon capture project is operational, the credit could jump to $1.00 per gallon at the One Earth facility. The Carbon Capture project remains on track, with construction complete and permitting the gating factor.

The Carbon Capture Catalyst

The Illinois moratorium on carbon pipeline permitting expires on July 1, 2026—a date Rizvi flagged as a key milestone. The company plans to submit its application to the Illinois Commerce Commission shortly after, and it continues to work with the EPA on the Class VI injection well permit. As Rizvi noted, “We continue to work closely with the EPA on our class 6 injection well permit application.” — Zafar A. Rizvi, Chief Executive Officer · 2026-05-28 The investments are significant: total project spend reached $176M against a $220–230M budget, funded entirely from the balance sheet with no debt.

…once we have the carbon sequestration facilities completed and our construction is completed at the One Earth Energy level, that we may be able to achieve $1 a gallon at that location.
Zafar Rizvi, Chief Executive Officer · 2026-03-26

That upside is what makes the sequestration initiative so valuable. The market has yet to fully price it in, perhaps waiting for the permit to clear.

Exports and Policy Tailwinds

The export market remains a strong tailwind: according to the Renewable Fuel Association, 2026 ethanol exports through March were up 20% year-over-year, echoing the optimism from prior calls. As Zafar Rizvi observed last December, “…Europe and several other countries are beginning to buy ethanol due to pressure from the tariff.” — Zafar Rizvi, Chief Executive Officer · 2025-12-04 That dynamic continues to benefit REX, which has no direct tariff exposure on its exports. Meanwhile, domestic policy is supportive—45Z credits are now flowing, and the company is monitoring potential E15 expansion. The combination of strong export demand and policy tailwinds positions REX well for the remainder of 2026.

What the Market Isn't Saying

Despite the record results, the stock has been flat over the past 90 days, down ~12.7% from its May peak. Notably, the earnings call had no analyst questions—an unusual silence that may reflect the market's focus on the permitting timeline rather than the strong quarterly beats. Free cash flow turned negative as capex surged, and buybacks paused this quarter after a heavy prior quarter, suggesting management is prioritizing growth investments. Still, Stuart Rose's closing confidence was palpable: “We have been public for over 40 years, we had our greatest first quarter in earnings per share in our public history.” — Stuart A. Rose, Executive Chairman · 2026-05-28 Investors will be watching for the Illinois application and any 45Z guidance updates as the true catalysts for the next leg.