Earnings Preview: MEMC Electronic Materials

MEMC Electronic Materials (WFR) is expected to report Q3 earnings after market close Thursday, October 23, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 88c for EPS and $530.01M for revenue, according to First Call. On Sept. 24 management provided an operational and financial update following Hurricane Ike. At that time, MEMC was targeting Q3 revenue to be approximately $530M, plus or minus $10M, with gross margin of approximately 51%, plus or minus 1%. Operating expenses were targeted to be approximately $43M.

Analyst Views

Kaufman said that investors shouldn't be surprised if once again, management finds a way to bury some extra expenses in the quarter; thus the firm is looking for non-GAAP EPS of 77c. Kaufman's channel checks indicate a drop in business on the semiconductor side driven by excess inventory. The firm expects this to show up in Q4 guidance. Kaufman's Q4 revenue estimate currently shows 19.8% sequential uptick and it thinks this may be aggressive. Kaufman does not expect sales in the solar segment can make up for the shortfall on the semiconductor side and indeed investors could see flat sequential guidance. Kaufman said it seems that every conceivable negative has been priced into MEMC shares.

The company has $6 per share in cash, no debt, and there is a $1B stock buyback program in place. Soleil said the key item in the company's earnings release will be management's guidance for Q4. The company continues to struggle to achieve higher levels of output from their Pasadena, Texas polysilicon facility (10 months after the additional capacity started up), and now the downturn in the semiconductor industry is presenting significant headwinds.