Sirius XM Radio Inc (SIRI) Poised For Strong Earnings

Sirius XM Radio Inc (SIRI) Poised For Strong Earnings
By Sirius XM Holdings [Public domain], <a href="">via Wikimedia Commons</a>

Sirius XM Radio Inc (SIRI) Poised For Strong Earnings

Sirius XM Radio Inc (NASDAQ:SIRI), a satellite radio services provider in the United States and Canada with more than 140 channels broadcasting music, sports entertainment, comedy, talk shows, news, weather and traffic, is expected to deliver positive results in the fourth quarter and for the full year 2013, according to analysts from Bank of America Corp (NYSE:BAC) Merrill Lynch.

The analysts said its time for investors to pay attention to the strong fundamentals of Sirius XM Radio Inc (NASDAQ:SIRI). According to them, the company is ready to prove that it is the fastest growing media company, citing some of the developments last year, including the implementation of capital-return strategy, and the management shake-up. They also emphasized that the accelerated growth of the satellite radio service provider is influenced by the booming auto industry.

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The management team of Sirius XM Radio Inc (NASDAQ:SIRI) recently released its 2013 guidance and pre-announced that it had 2 million net addition in 2012 and at least 530K net additions for the fourth quarter. Based on the figures, the analysts estimated that the final sub net addition for the company in 4Q could be more than 550K.

The company also projected a revenue of $3.7 billion for 2013, EBITDA of $1.1 billion, and an FCF of approximately $900 million.

The analysts explained, “The key driver for such strong net additions (it is notable that guidance had been raised multiple times over the course of last year) has been stronger than expected SAAR (Seasonally Annual Adjusted Rate of auto sales). During 2012, monthly SAAR beat expectations in 8 out of 12 months.”

The research team of BAML expects a rapid growth of SAAR this year and over the coming years. By 2014, SAAR could reach approximately 16.5 million in the United States. They believe that satellite radio could be an OEM option for half of the vehicles in the country within the next six years.

The analysts noted that Sirius XM Radio Inc (NASDAQ:SIRI) is a major OEM contractor with General Motors Company (NYSE:GM), which would bring immediate economic benefits to the company. It is also preparing to increase its royalty rates to subscribers. In connection, the analysts adjusted their estimates for the company to reflect the impact of the GM contract.

In a research note, BAML analysts wrote, “We are making modest changes to our estimates, and now reflect the change in the GM contract in our subscriber/revenue and EBITDA estimates. SIRI trades at 14.1x, EV/EBITDA, 17.6x P/E and 12.6x P/CF (all based on 2014E estimates).” They reiterated a buy rating and $4 price target.


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