MEMC Electronic Material Still Atop Citi's Top Picks List Following Earnings Results

Since the addition to Citi's Top Picks Live, Citi has been building a case that 2011 would be the first year where MEMC Electronic Material's WFR estimate revisions finally start moving higher. While this remains a complex model and CQ4 headline EPS was lower than expected due to pricing on a big SunEd project, this should go down as a watershed Q as C2011 EPS guidance of $1.00- 1.30 threaded the needle against the Street $1.00. Citi is leaving its C2011 EPS little changed at $1.54 so Citi thinks there is still quite a bit of headroom above this guidance, particularly in the SunEdison business. Additionally, given visibility that Citi thinks is building on a much bigger 2012 for SunEd, it is increasing C2012 EPS from $1.80 to $2.01. While Citi does think upside exists in the core wafer business, most of the market dislocation appears to be in SunEd and its EBITDA potential. Even a mid-single digit multiple and fully burdening the business with project debt and no cash suggest it should be worth at least $7/share on its own in addition to at least $10-11 for the core business just based on replacement cost of the assets. Citi has a Buy rating and $18 PT on WFR WFR closed Tuesday at $11.63