1:15pm (EST)
SIRIUS XM Radio (SIRI, $1.86, up $0.02) reports 4th quarter earnings Tuesday, February 15th, before the bell.
Consensus:
Earnings: $0.00
Revenue: $739.2M
The chart below shows data provided from their earnings press releases with earnings estimates placed for the 4th quarter of FY2010. Earnings per share are non-GAAP.
|
Revenue – Quarterly Results (in $Millions) |
Earnings Per Share – Quarterly Results |
||||||
|
|
2010 |
2009 |
2008 |
|
2010 |
2009 |
2008 |
|
1st Qrt |
663.8 |
587.0 |
270.4 |
1st Qrt |
$0.01 |
-$0.07 |
-$0.42 |
|
2nd Qrt |
699.8 |
590.8 |
283.0 |
2nd Qrt |
$0.00 |
$0.01 |
-$0.38 |
|
3rd Qrt |
715.5 |
618.7 |
488.4 |
3rd Qrt |
$0.01 |
$0.00 |
-$0.06 |
|
4th Qrt |
739.2 |
676.2 |
622.2 |
4th Qrt |
$0.00 |
$0.00 |
-$0.09 |
Earnings has stayed about the same over the last six quarters, and 4th quarter is expected to continue that trend. Revenue has almost linearly increased over the last five quarters, and 4th quarter is also expected to continue the trend.
Figure 1: The chart below shows calculations for the growth from prior quarters with earnings estimates placed for the 4th quarter of FY2010.
|
Revenue Difference (in $Millions) |
Earnings Per Share Difference |
||||||
|
|
2010 |
2009 |
2008 |
|
2010 |
2009 |
2008 |
|
1st to 2nd |
36.0 |
3.8 |
12.6 |
1st to 2nd |
-0.01 |
0.08 |
0.04 |
|
2nd to 3rd |
15.7 |
27.9 |
205.4 |
2nd to 3rd |
0.01 |
-0.01 |
0.32 |
|
3rd to 4th |
23.7 |
57.5 |
133.8 |
3rd to 4th |
-0.01 |
0.00 |
-0.03 |
Figure 2: The chart below shows calculations for the growth from prior years with earnings estimates placed for the 4th quarter of FY2010.
|
Revenue Difference (in $Millions) |
Earnings Per Share Difference |
||||
|
|
2009 to 2010 |
2008 to 2009 |
|
2009 to 2010 |
2008 to 2009 |
|
1st Qrt |
76.8 (13%) |
316.6 (117%) |
1st Qrt |
0.08 (114%) |
0.35 (83%) |
|
2nd Qrt |
109.0 (18%) |
307.8(109%) |
2nd Qrt |
-0.01 (-100%) |
0.39 (103%) |
|
3rd Qrt |
96.8 (16%) |
130.3 (27%) |
3rd Qrt |
0.01 (100%) |
0.06 (100%) |
|
4th Qrt |
63.0 (9%) |
54.0 (9%) |
4th Qrt |
0.00 (0%) |
0.09 (100%) |
With the revival of the auto industry, SIRI’s, the only major satellite radio operator, profits should rise. Ford and GM both reported sales growth. In the month of December, total auto sales rose 11.2%. Plus, holiday sales should give 4th quarter revenue a boost. In Figure 1, earnings decreased from the 3rd to 4th quarters compared to the 2nd to 3rd quarters of 2010. In Figure 2, revenue for 4th quarter from 2009 to 2010 only increased 9%, a drop from the 15-16% average for each of the other quarters from 2009 to 2010. Based on these points and the two figures above, the 4th quarter estimates seem too low.
In recent news, Bloomberg Briefs hinted that SIRI could be an acquisition target by Live Nation Entertainment (LYV, $11.60, flat), which is working with Liberty Media. Liberty, which owns over 20% of LYV, bailed out SIRI two years ago from bankruptcy. An acquisition by LYV may be in Liberty’s best interest.
Despite its 100% gain the past year, SIRI could do over $1 billion in free cash flow and no debt by 2015 which all seems to bode well for the company. Let’s look at the chart real quick:
Source: Yahoo Finance
The stock price has broken through resistance on a similar slope as it did from September 10th to November 10th, in which it averaged an increase of 1 cent/day. Thus, if the company surprises, the stock should easily hit $2 in 20 days. If it disappoints, it will fall back to support of $1.60 in about 20 days. Though we think SIRI will surprise, to be on the safe side, buy both 30-day calls at $2 and 30-day puts at $1.60. This gives an extra 10 day leeway. You can also sell the calls or puts before the expiration date. It also protects you if they disappoint, which will cause the stock to plunge. After all, the shares are pricy with a PE of over 70.
Of course, it’s hard to get excited about playing options on a stock that is under $2 because it makes more sense to buy the stock if a turnaround story is in place.
As far as the market today, the market has traded in a tight range but the bias seems to be to the upside. The Dow is down 10 points to 12,263 while the S&P is up 3 points to 1,331. The Nasdaq is higher by 8 points to 2,817.
We have a lot to cover in our Members Area so let’s get to it.
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