Wednesday, July 27, 2011

MEMC Electronic Materials Inc. (NYSE: WFR): Q2 Earnings Preview 2011

MEMC Electronic Materials Inc. (NYSE: WFR) is scheduled to release its second-quarter earnings after the closing bell on Wednesday, July 27, 2011. Analysts, on average, expect the company to report earnings of 8 cents per share on revenue of $702.80 million. In the year ago quarter, the company reported earnings of 6 cents per share on revenue of $448.30 million.

MEMC Electronic Materials, Inc. designs, manufactures, and sells silicon wafers for the semiconductor industry worldwide. With manufacturing and research and development facilities in the United States, Europe and Asia Pacific, the Company enables high performance semiconductor and solar applications.

In the preceding first quarter, the St. Peters, Missouri-based company's net income was $4.5 million, or 2 cents per share, compared to a loss of $9.6 million, or 4 cents per share, in the year-earlier quarter. On an adjusted basis, the company earned 9 cents a share in the first quarter. Revenue climbed to $735.9 million from $437.7 million. Analysts, on average, expected the company to report earnings of 13 cents per share on revenue of $638.82 million.

At its last earnings call in May, the company reaffirmed its earnings guidance range of $0.25 to $0.55 per share for the full year. MEMC also backed its adjusted earnings guidance range of $1 to $1.30 per share for the full year. MEMC's full-year revenue guidance remains unchanged at $2.8 billion - $3.1 billion. The company said that it still expects adjusted sales in the range of $3.4 billion - $3.7 billion for the full year.

MEMC’s solar initiatives are encouraging.MEMC Electronic Materials Inc.’s (NYSE:WFR) Singapore affiliate recently formed a strategic alliance with Korea-based Jusung Engineering Co. Ltd. Under the agreement, MEMC Singapore and Jusung will combine forces to develop and maintain a high efficiency solar cell production facility for SunEdison (an MEMC subsidiary). Jusung Engineering supplies advanced technology and tools for the fabrication of solar photovoltaic cells. Both partners will have equal interests in the project and will shell out $16.0 million each as upfront cost. In May, MEMC sealed a similar strategic deal with Electronics Manufacturing Services (EMS) provider Flextronics International Ltd. (NASDAQ:FLEX). Under the agreement, MEMC Singapore and Flextronics will combine forces to fabricate solar panels for SunEdison. MEMC also entered into a 50-50 joint venture with JA Solar Holdings Co. Ltd. (NASDAQ:JASO) in March. The two companies have agreed to build and operate a solar cell production facility in China.

However, declining price of polysilicon remains a major concern. The company recently announced the termination of the solar wafer supply agreement between its Singapore unit and Suntech Power Holding Co. Ltd. (NYSE:STP). MEMC will receive a handsome $120.0 million from Suntech for the termination. The original deal between MEMC Singapore Pte Ltd. and Suntech, the leading Chinese solar energy company, was struck in 2006. Per this 10-year deal, MEMC was required to supply solar wafers at a predetermined price. As an advance, Suntech deposited a certain security amount and allowed MEMC to take over up to a 4.99% stake in it. However, persistent downturn in polysilicon prices led the companies to amend the contract twice in 2009. Accordingly, prices were cut and volumes were raised. But as further price declines were noticed during the first half of this year, MEMC and Suntech mutually consented to put an end to the contract.

Full Disclosure: None.
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