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Is a Surprise in Store for SIRIUS XM (SIRI) in Q1 Earnings?

Zacks Equity Research

Sirius XM Holdings SIRI is scheduled to report first-quarter 2017 results on Apr 27, before the market opens.

Last quarter, the company’s bottom line met the Zacks Consensus Estimate while the top line beat the same. Earnings improved on a year-over-year basis as well. Total revenue of $1.30 billion grew 9% year over year and also surpassed the Zacks Consensus Estimate of $1.28 billion.

Price Performance

Shares of Sirius XM outperformed the Zacks categorized Broadcast Radio and Television industry over the last three months. The stock rallied 8.02% while the industry gained 6.60%. 

Factors at Play

The company's healthy net subscriber growth is encouraging. This is expected to drive first-quarter results. The company's efforts to expand its product portfolio also raise optimism. We are also impressed by the company's initiatives to reward shareholders. Also, Sirius XM’s move to increase stake in its Canadian unit to 70% from 37% is a positive. The company’s deal with a leading player like AT&T to provide 4G LTE connectivity also raises hopes of better returns in the future.

However, Sirius XM’s high debt level raises concerns. Increased leverage and stiff competition are likely to act as headwinds.

Earnings Whispers

Our quantitative model does not show conclusively that Sirius XM is likely to beat earnings in the first quarter. According to our proven model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings surprise. However, that is not the case as highlighted below.

Zacks ESP: The Earnings ESP for Sirius XM is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 4 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sirius XM carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP complicates our surprise prediction.

Please note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Sirius XM Holdings Inc. Price and EPS Surprise

 

Sirius XM Holdings Inc. Price and EPS Surprise | Sirius XM Holdings Inc. Quote

Stocks to Consider

Investors interested in the broader consumer discretionary space may consider the following stocks. This is because our model shows that these companies possess the right combination of elements to post an earnings beat this quarter.

American Airlines Group AAL has an Earnings ESP of +3.64% and a Zacks Rank #3. The company will report first-quarter results on Apr 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

C.H. Robinson Worldwide CHRW has an Earnings ESP of +2.50% and a Zacks Rank #3. The company will report first-quarter results on Apr 25.

Air Lease Corporation AL has an Earnings ESP of +1.16% and a Zacks Rank #3. The company will report first-quarter results on May 4.

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