What's Driving Sirius XM Radio's Earnings?

Next Tuesday, Sirius XM Radio (NASDAQ: SIRI  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Sirius inspires strong reactions from investors, as its impressive recovery from near-oblivion during the financial crisis has brought its stock back up to pre-financial-crisis levels. But will the company ever produce the truly explosive growth it will need if it wants to see its stock regain levels last seen during the tech boom more than a decade ago? Let's take an early look at what's been happening with Sirius XM Radio over the past quarter and what we're likely to see in its quarterly report.

Stats on Sirius XM Radio

 

 

Analyst EPS Estimate

$0.03

Change From Year-Ago EPS

50%

Revenue Estimate

$906 million

Change From Year-Ago Revenue

12.6%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

Will Sirius XM Radio deliver earnings growth this quarter?
Analysts have stayed confident in their calls for Sirius XM's earnings over the past quarter, keeping their $0.03 per share estimate unchanged in recent months. But they've dropped their consensus for full-year 2013 earnings by $0.01 per share, and that has kept the stock roughly unchanged since mid-January.

Sirius can point to positive trends that should support earnings this quarter. Auto sales have been extremely strong and, given the importance that the auto industry has for pre-installed satellite-radio sales, good performance from automakers often translates to positive results for Sirius.

But some investors have been concerned about slowing growth. Early in the year, Sirius projected just 1.4 million net subscriber additions for 2013 and, although the company has been conservative with past projections, that figure is well below the 2 million additions last year. Although Sirius has dominant market share in providing satellite radio for automobiles, some believe that Pandora, Spotify, and other competitors will eventually eat into that dominance, as wireless Internet access becomes more available in vehicles.

In addition, Sirius investors are trying to figure out the strategy that major shareholder Liberty Media (NASDAQ: LMCA  ) has for its holdings in the company. Last month, Liberty bought a 27% stake in cable TV operator Charter Communications, using capital that some Sirius investors had hoped Liberty would spend making a premium buyout offer for the remainder of the satellite radio company that it doesn't own. So far, Liberty hasn't committed either to a buyout or to a spinoff of its Sirius shares, seemingly content to keep its majority control.

In Sirius XM's report, watch closely to see if the company begins to ramp up its guidance for the full 2013 year. Last year, similarly conservative early estimates led to much higher actual results later on, and if the same trend holds true this year, then the stock could break out of its holding pattern sooner rather than later.

Despite Sirius XM being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in The Motley Fool's brand new premium report. To get started, just click here now.

Click here to add Sirius XM Radio to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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