MEMC Comes Clean on Earnings (WFR)

The solar sector has been in the tank, and semiconductor outfits have been handing out earnings and revenue warnings galore.  So, even after a big bounce in recent days, should it be any surprise at all that MEMC Electronic Materials, Inc. (NYSE: WFR) has issued preliminary reports that it will fall short of its quarterly targets?

Don’t be fooled by GAAP versus non-GAAP, because the GAAP report looks better than what the analysts will be focusing on.

MEMC now anticipates fourth quarter 2011 GAAP revenue of $698 million to $733 million, above the range previously expected range given in early December.  The GAAP EPS for the period will be in the range of ($6.50) to ($5.78), slightly lower than the previously announced range of ($6.38) to ($5.20).

Fourth quarter non-GAAP revenue will be approximately $753 million to $792 million and earnings will be in a range of ($0.23) to ($0.17).  The non-GAAP range is below the previously estimated range primarily due to solar energy project timing and largely non-cash adverse tax effects associated with world-wide income distribution.  It noted, “Excluding these unfavorable tax effects, non-GAAP EPS for the quarter is expected to be in the range of ($0.11) to ($0.05).” 

The company also noted that it now has roughly $586 million of unrestricted cash and total liquidity in excess of $800 million.

Because the warnings were expected and because they are not so bad, shares are down “only” 1.75% at $4.48 and the 52-week trading range is $3.65 to $15.04. 

JON C. OGG