Grab your cats-o'-nine-tails, Fools: It's almost time for that whipping boy of value investors everywhere, Sirius Satellite Radio (NASDAQ:SIRI), to report on its financial progress for the fourth quarter of 2005. The company is expected to report tomorrow, before the market opens.

Wall Street Wisdom:

  • General consensus. This is a high-visibility stock -- and not just because its satellites are hanging up there for everyone to see. Thirty analysts spend their waking hours tracking the company's (lack of) profits. Of these, a whopping 18 rate the stock a buy on its prospects. Four rate it a sell on its lack of prospects. Eight more are on the fence.
  • Revenues. Sirius' revenue growth is nothing short of astounding. Analysts predict that it will report 199% year-over-year growth to $75.4 million.
  • Earnings (or lack thereof). Wall Street expects Sirius' loss per share to widen by 5% year over year to $0.22 per share. The deterioration would have been a bit more than that but for an increase in share count by, at last count, about 5% over the past year.

Margin watch:
Sirius can't be analyzed by conventional metrics -- that is, watching for improvements in gross, operating, and net profits over time. The reason: All of these numbers were negative. The chart below, however, suggests that this situation appears to be about to change. The company's rolling gross margins finally turned positive last quarter.

It still has no positive operating or net margins for us to monitor. But the continuing decline in selling, general, and administrative expenses in relation to total revenues suggests that, if we wait long enough -- and if the company can stay in business long enough -- operating margins may eventually move into the black as well.

Mrg. %

6/04

9/04

12/04

3/05

6/05

9/05

Grs.

(161.1)

(109.7)

(80.9)

(40.6)

(7.8)

15.1

SG&A Mrg.*

962.3

781.2

745.4

572.9

458.2

362.2
*Cost as a percentage of revenues.
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
So long as Sirius continues to burn cash (as evidenced by its negative free cash flow), two things need to remain foremost in Foolish minds: dilution of shares and debt. To remain solvent, the company must issue one or the other until it can afford to pay its keep from its operations. Tomorrow, we won't see the 34.4 million new shares issued to Howard Stern show up on the company's income statement -- they weren't issued until Jan. 9, 2006. But factor those in to your expectations for next quarter.

Fool contributorRich Smithhas no financial interest, short or long, in Sirius.