Backed by impressive figures from their solar energy segment MEMC Electronic Materials Inc. (NYSE: WFR), manufacturer and seller of silicon wafers that are used primarily in semiconductor and solar energy technologies, rebounded nicely from a dismal first quarter 2012 and posted an second quarter earnings report strong enough to attract attention from investors. Those figures sent shares as high as 2.87 during the trading session, considerably higher than the 52-week low of 1.44 they hit back in early June. While shares retreated throughout the day they still closed at 2.28 with volume topping the 31 million mark, well ahead of their average.
The positive reaction to WFR’s earning report comes despite the company reporting a loss of $61.3 million during the three-month period compared to a net income of $47.3 million for the same period one year earlier. What investors found favorable was the revenue generated by WFR during the most recent three month frame, $808.4 million, an 8% increase over the $745.6 reported for the second quarter 2011 and a 56% increase over the $519.2 million recorded for the first quarter 2012.
WFR’s solar segment was the driving force behind their revenue jump accounting for $575.7 million, a 22% increase from the 2011 second quarter and a 90% increase from the 2012 first quarter. WFR noted in their earnings release “The year-over-year increase was driven by higher solar project sales, partially offset by lower solar wafer pricing and volume. The sequential increase was largely driven by higher solar project sales. Solar energy projects representing 144 MW were recognized under segment GAAP revenue in the 2012 second quarter, compared to 23 MW in the 2011 second quarter and 47 MW in the 2012 first quarter.”
As for the company’s semiconductor materials segment the numbers weren’t as strong, totaling $232.7 million, a 15% slide from the second quarter 2011. While that figure was an 8% increase over the first quarter 2012 revenue that’s more a reflection on just how bad that quarter really was for WFR. Most of the blame for the year-over-year slide was attributed to lower sales volume in small diameter wafer and softer pricing across all diameters.
On a whole company CEO Ahmad Chatila was upbeat about the earnings report stating “Our improved results were driven by better performance in both our Semiconductor Materials and Solar Energy segments. We sold several large European solar projects despite highly uncertain market conditions, and we experienced stronger semiconductor wafer demand. As a result, our financial position strengthened.”
Chatila went on to say, “For the second half of the year, we remain committed to driving a healthier balance sheet and stronger returns for our stakeholders.” WFR may be committed but analysts remain skeptical about the company’s prospects as the average estimates for the third quarter stand at 0.01 per share, a dramatic drop from the 0.12 per share estimated just three months ago.
Judging by the outlook provided by WFR in the earnings report it may be wise to take notice of what those analysts expect. WFR stated, “In light of the current uncertainty in the semiconductor and solar markets, the company is not providing specific revenue and earnings guidance at this time.”
Of course analysts can be wrong, as evidenced by their estimates for the second quarter 2012 in which they were expecting revenue in the neighborhood of $722.2 million. In all likelihood it will take another strong quarter from WFR before they can win over not only analysts but unconvinced investors as well.
There is good reason for caution as WFR is still trying to get their feet back on solid ground following a major restructuring in December. As part of that plan WFR shut down plants and cut 1,300 jobs in an effort to save money as demand for semiconductors dropped and an oversupply in the solar market sent prices crashing.
While WFR is doing a good job of controlling their spending, recording capital expenditures of $36.3 million in the 2012 second quarter, a significant cut from the $102.7 million recorded in the second quarter 2011 and the $40.0 million in the 2012 first quarter, they will need more than that to find success. Unfortunately the demand in the market isn’t exactly working in WFR’s favor and they can’t afford to report too many quarters with losses that top $60 million.