Earnings Preview: MEMC Electronic Materials

MEMC Electronic Materials (WFR) is expected to report Q2 earnings Wednesday July 23 after market close, with a conference call scheduled for 5:30 pm ET.

Guidance

The consensus estimate is $1.00 for EPS and $557.92M for revenue, according to First Call. Company guidance for Q2 from its prior earnings call is: revenue of $540M to $570M.

Analyst Views

American Technology expects an in-line Q2 with improved gross margins and operating margins as their checks show poly demand has yet to ease and the majority of capacity is booked through long-term contracts. AmTech expects Memc to maintain FY08 guidance. The stock has sold off on concerns about capacity ramps and oversupply. Memc now trades just above its recent 3-year trough. AmTech likes the risk/reward at these levels.

Citigroup has the contrarian view on the street. They maintain a relatively cautious view (the Street is broadly positive / Buy recommended) given what they see could be some risk around Q2 against the Street largely expecting an in-line quarter and guidance. So, while Memc stock appears to be finally discounting much of Citgroup's long-held poly supply concerns, they would rather not get aggressive quite yet. That said, Citigroup would look to get more aggressive post-Q2 report on any material weakness into the $40's.

Key issues for call: An update on the Silane capacity ramp and any potentially lingering issues; details on the timing of in-house wafering capacity and if WFR can do it cheaper than current partners; an update on the poly supply outlook and pricing; and any details as to whether WFR will become a broader materials supplier as a result of Silane, versus just a wafer supplier.