On Tuesday, Sirius XM Radio Inc (NASDAQ:SIRI) will report its fourth quarter earnings report after the bell. On Monday, Goldman Sachs Group, Inc. (NYSE:GS) put together a fourth-quarter earnings note preview, “4Q12 preview: Less risk post pre-release, momentum continues.”

Sirius XM

Analysts have a “Buy” rating on the stock. Year-to-date, the stock is up 10.03% and it is currently trading at $3.18.

Here’s some highlights from the report.

What’s changed

With the company having given a preliminary update on 4Q12 and introducing 2013 targets (on January 9), analysts see less risk around quarterly results. Specifically, SIRI noted it ended the year with 23.9 million subscribers, implying 2.0 million net adds (vs. most recent guidance of 1.8 million) and 1.6 million+self-pay net adds (up over 30% year-over-year).

The company also noted it expects to meet or exceed all of its 2012 financial guidance. With this note, analysts will introduce their  2015 FCF (company defined) of $1,424 million and FCF/share of $0.26.


It seem the momentum has continued from 2012 into 2013. Analysts expect the company’s 4Q12 results to reflect another quarter of accelerating top-line growth, to +14.2% year-over-year (+60bp quarter-over-quarter) this quarter. Revenue momentum is a function of continued subscriber growth strength (as noted above, given improving auto sales), along with (what analysts expect to be) another quarter of accelerating ARPU growth to +5.1% year-over-year this quarter (with continued benefits from the 2012 rate hike).

Analysts expect revenue growth to continue outpacing opex and drive another quarter of margin expansion, while flattish capex and lower interest costs should drive an expected 50%+ year-over-year increase in company-reported FCF to $297 million. Upside to 2013 targets, as Sirius XM Radio Inc (NASDAQ:SIRI) remains one of the analysts’ top ideas.

While 2013 targets imply substantial growth across revenue/EBITDA/FCF (9%/22%/29%), analysts believe they may still prove conservative. They see incremental upside to SIRI via greater than expected growth in free cashflow (FCF) and FCF/share estimates. Analysts expect Sirius XM Radio Inc (NASDAQ:SIRI) to utilize FCF and an under-levered balance sheet to aggressively repurchase shares, shrinking share count nearly 20% through 2015E and 45% over the next 10 years.

Analysts have a $3.50, 12-month price target as the average of DCF/yield analysis.

Key risks
These include competition from free radio and weaker auto sales.

In other Sirius XM Radio Inc (NASDAQ:SIRI) news, just last week, the company announced a new alternative morning radio show to begin on Feb. 11. Stand-up comedian, Pete Dominick, will host the three-hour show from 6 to 9 a.m. ET.

Dominick currently has a 3 p.m. ET show, ‘STAND UP! With Pete Dominick’, which allows listeners to phone in. He also interviews subjects for the Sirius XM Radio Inc (NASDAQ:SIRI)’s Potus politics channel. His move to the morning will fall under new a male-oriented Indie channel (formerly called Stars Too), reported the New York Times.

The new morning show will have the same name, but the host recently said it will not be “stuck in the paradigm of politics.” Dominick will discuss religion, race, energy, education policy, veterans’ issues and parenting.