Earnings Preview: MEMC Electronic

| About: SunEdison, Inc. (SUNEQ)
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MEMC Electronic (WFR) is expected to report Q2 earnings after the market close on Wednesday, August 3, with a conference call scheduled for 5:30 pm ET.


The consensus estimate is 8c for EPS and $699.89M for revenue, according to First Call. On its last earnings call, management provided FY11 guidance of non-GAAP EPS of $1.00-1.30 on revenue in the $3.4B-$3.7B range. Management further commented that despite unfavorable events such as legal verdicts and the Japan earthquake, it will remain focused on strategic business objectives, invest in growth and drive productivity in the core businesses. Analysts have been concerned about declining solar wafer pricing due to an oversupply across the supply chain -- and the are concerned that it will not be possible for MEMC to offset the price declines with the ongoing cost reduction program.

Analyst Views

Susquehanna expects the company to report pro forma EPS/revenue of (1c)/$545M. The firm expects MEMC to lower its pro forma based FY11 revenue guidance, driven mainly by ASP pressure in the solar segment, while semi wafer demand in 2H11 is expected to be below seasonal trends. Nevertheless, Susquehanna believes this is already factored in the current share price. According to Susquehanna, investors will look for: 1) more color on the SunEdison project backlog - time of completion, percentage of outright sale, additional color on sales-lease back and thus working capital requirements and revenue/cost recognition; 2) traction on cost-cutting/margin-improvement efforts; and 3) a possible floor for solar wafer ASPs.