MEMC Electronic Materials Inc. Earnings Cheat Sheet: Higher Expenses Shrinks Margins

S&P 500 (NYSE:SPY) component MEMC Electronic Materials Inc. (NYSE:WFR) swung to a loss in the third quarter, missing analysts’ forecast. Memc Electronic Material manufactures and sells silicon wafers that are used primarily in semiconductor and solar energy technologies.

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MEMC Electronic Materials Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $94.4 million (41 cents per diluted share) in the quarter. MEMC Electronic Materials Inc. had a net income of $17.6 million or 8 cents per share in the year earlier quarter.

Revenue: Rose 2.6% to $516.2 million from the year earlier quarter.

Actual vs. Wall St. Expectations: WFR reported an adjusted net loss of 22 cents per share. By that measure, the company fell short of mean estimate of 12 cents per share. It fell short of the average revenue estimate of $795.6 million.

Quoting Management: “Although the markets in which we participate remain challenging, actions we took over the past several quarters have positioned us to better navigate this period,” said MEMC’s CEO Ahmad Chatila. “Our Semiconductor Materials business experienced softer demand during the quarter, but we believe our 300mm expansion in Korea enabled us to reduce the impact of underlying market weakness. Our Solar Materials business experienced further deterioration in solar wafer pricing, but remains positioned to compete in this uncertain market environment as customers turn to higher quality, stable suppliers with solid balance sheets. This business remains the foundation of our overall solar strategy, and we will continue increasing productivity to profitably serve our downstream solar business in future periods. SunEdison’s pipeline grew sequentially and now stands at 3.0 GW. This pipeline provides demand visibility to our upstream business, enhancing stability amidst an uncertain market environment. Our strategy of increasing semiconductor and solar productivity while investing for the long-term has not changed, and we remain committed to prudently managing our balance sheet and staying focused on cash flow.”

Key Stats:

Gross margin shrank 5.5 percentage points to 11.4%. The contraction appeared to be driven by increased costs, which rose 9.4% from the year earlier quarter while revenue rose 2.6%.

Revenue has risen the past four quarters. Revenue increased 66.3% to $745.6 million in the second quarter. The figure rose 68.1% in the first quarter from the year earlier and climbed more than twofold in the fourth quarter of the last fiscal year from the year-ago quarter.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 29 cents versus a mean estimate of net income of 7 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 45 cents a share to 32 cents over the last ninety days. The average estimate for the fiscal year is 84 cents per share, down from 91 cents ninety days ago.

Competitors to Watch: Daqo New Energy Corp. (NYSE:DQ), AXT, Inc. (NASDAQ:AXTI), First Solar, Inc. (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWRA), Spansion Inc. (NYSE:CODE), Micron Technology, Inc. (NASDAQ:MU), GT Solar Intl., Inc. (NASDAQ:SOLR), Hoku Corporation (NASDAQ:HOKU), Cymer, Inc. (NASDAQ:CYMI), and Photronics, Inc. (NASDAQ:PLAB).

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(Source: Xignite Financials)