Mephisto,
I'm sure one or two analysts read these boards from time to time. Maybe one of them could give you a good explanation. I suspect that many do work closely with the companies they cover and use a lot of internal company projections, perform a little alchemy and come up with a number for earnings.
I know one thing however, that earnings projections much beyond two quarters involve a lot of guesswork, albeit educated guesswork. So, I tend to be a bit suspicious of earnings projections for the next fiscal year, for example.
Remember that a year ago a lot of analysts were telling us that, since semiconductors were being used in everything from Automobiles to Zamboni machines, then the semiconductor industry wasn't really cyclic anymore? This provided the rationale for paying $90 for a share of Micron and similar multiples for other semis. Whoops!
At any rate, I notice that First Call shows analysts projecting about a 14% increase in MEMC's earnings in FY 97 over FY 96. Ninety days ago, the projected earnings growth was closer to 20%. Virtually all the reduction in the projected growth can be attributed to increasing earnings estimates for this year.
Analysts have been consistently low in their earnings projections for WFR. Partly, this is because this conservative company has been guiding them lower, and partly because this has been a relatively poor year for the semis. Many analysts are projecting more trouble into the future and keeping their numbers for MEMC low.
As I said before, I'm long this company. When the semis snap out of their funk, so will WFR.
BTW, I've had a couple of posts that have mysteriously disappeared from this board not related to the server failure of a few days ago. Have you had this problem too? I'm new to SI and was wondering if there's some sort of editing process going on that I'm unaware of. I avoid hype and vulgarity in my messages and am a bit mystified about the lost posts.
Bob M. |
