Can Sirius XM Beat Estimates in Q4?

by Trefis Team
Sirius XM Radio
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Sirius XM Radio (NASDAQ: SIRI) is scheduled to announce its fiscal fourth-quarter results on Tuesday, February 4. We expect the company to beat the full year’s earnings consensus of $0.20. For full-year 2019, Trefis estimates that the company will report:

  • Revenues of $7.8 billion, reflecting 35% y-o-y growth, primarily driven by the Pandora acquisition in early 20119. Our revenue forecast is slightly lower than the consensus estimate of $7.9 billion.
  • EPS figure will likely be $0.22, primarily due to higher revenues, and lower share count, offset by a strong growth in expenses, as compared to the previous year. Our EPS figure forecast is marginally higher than the consensus estimate of $0.20.

Our forecast indicates that Sirius XM’s valuation is $6 per share, which is below the current market price of around $7. Look at our interactive dashboard analysis on Sirius XM Pre-Earnings: Will Sirius’ 2019 Earnings Beat Consensus? for more details.

(1) Revenues expected to be slightly below consensus estimates

Trefis estimates Sirius’ 2019 revenues to be $7.8 billion, slightly below the consensus estimate of $7.9 billion

Revenues $7.8 Bil vs  Consensus $7.9 Bil (Surprise -($0.08)* Bil)

  • Total revenues have increased at an average annual rate of 7% over the last two years, from $5 billion in 2016 to $5.8 billion in 2018.
  • However, it is expected to grow by more than 30% in 2019. This would be driven by a $1.9 billion increase in Subscriber Revenues, due to the acquisition of Pandora in early 2019. With SiriusXM’s subscription-based national service of curated and exclusive content and programming, and Pandora, the largest U.S. streaming music provider with its highly personalized free ad-supported service – the combined entity will cater to more than 100 million listeners in North America, with close to 40 million self-paying subscribers, and 75 million trial and ad-based listeners.

(2) EPS likely to narrowly beat consensus estimates

EPS expected to decrease 15% from $0.26 in 2018 to $0.22 in 2019, largely due to increase in Total Expenses. The expense figure includes preferred dividend and other minority expenses.

As we forecast Sirius’ Revenues to grow at a slower rate than Expenses in 2019 (35% vs. 72%), this will result in a 8% decrease in Sirius’ Net Income Margin figure from 20.4% in 2018 to 12.5% in 2019.

 Total Revenues $7.8 Bil

– Total Expenses $6.8 Bil

= Net Income $1.0 Bil

÷ Shares Outstanding 4.5 Bil

= EPS $0.22 vs Consensus $0.20 (Surprise $0.02)

(3) A trailing P/E multiple of 29.5x looks appropriate for Sirius’ stock, which is lower than the current implied P/E multiple of 35.4x

We use our full cash flow model for Sirius XM to arrive at a P/E multiple of 29.5x for a price estimate of $6.

Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year

See all Trefis Price Estimates and Download Trefis Data here

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