Will Subscriber Growth Drive Sirius XM???s (SIRI) Q4 Earnings?

Sirius XM Holdings SIRI is scheduled to report fourth-quarter results on Jan 31 before the market opens.

Last quarter, the company delivered a positive surprise of 50% with better-than-expected earnings and revenue performance. The bottom line soared 50% from the year-ago figure while the top line climbed nearly 8% year over year.

Let’s see, how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Sirius XM is likely to beat estimates this quarter on the back of its perfect combination of the two key ingredients:

Zacks ESP: Sirius XM has an Earnings ESP of +2.70%. A positive ESP indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sirius XM has a Zacks Rank #2 (Buy), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have significantly higher chances of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

What is Driving This Better-Than-Expected Earnings?

Sirius XM’s healthy net subscriber growth is anticipated to drive the results in the soon-to-be-reported quarter. Notably, the company has recently provided an update on its better-than-expected performance in 2017 with respect to self-pay subscriber additions. The company said that it added approximately 1.56 million self-pay subscribers last year, higher than its guidance of approximately 1.4 million additions.

This upside further led to the company ending 2017 with 27.5 million self-pay subscribers. While the comparable 2016 figure was approximately 26 million. Additionally, the company’s efforts to reward shareholders through dividends and share buybacks are encouraging. A detailed update on the issue is expected on the fourth-quarter conference call.

High costs might hit results in the fourth quarter like the previous one. The slowdown in auto sales might also ailthe quarterly report.

The company’s high-debt levels are another concern. Moreover, increased leverage coupled with stiff competition might act as headwinds for the company in the yet-to-be-reported quarter.

Other Stocks to Consider

Investors also interested in other stocks worth considering from the broader Consumer Discretionary sector may check out AMC Entertainment Holdings, Inc. AMC, Activision Blizzard, Inc ATVI and Churchill Downs, Incorporated CHDN as these stocks possess the right combination of elements to beat on earnings in their next releases this time around:

AMC Entertainment has an Earnings ESP of +6.39% and a Zacks Rank #3. The company is expected to report fourth-quarter results on Feb 27.

Activision Blizzard has an Earnings ESP of +1.94% and a Zacks Rank of 3. The company is scheduled to release fourth-quarter results on Feb 8.

Churchill Downs has an Earnings ESP of +29.03% and a Zacks Rank of 1. The company is expected to announce fourth-quarter earnings on Feb 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

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