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SIRIUS XM Radio Inc. (SIRI) Q4 Earnings Preview: Investors Met A Stock Who Played The Blues, And Asked For Some Happy News…

 February 01, 2013 03:16 PM

(By Rich Bieglmeier) SIRIUS XM Radio Inc. (SIRI) plans to release full year and fourth quarter 2012 financial and operating results on Tuesday, February 5, 2013 before the market open, and will hold a conference call at 8:00 am ET. Wall Street anticipates that SIRI will earn $0.02 for the quarter. iStock expects the satellite radio services company to report earnings that will match Wall Street's consensus number. The iEstimate is $0.02, too.

Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. The company broadcasts approximately 135 channels, including music, sports, entertainment, comedy, talk, news, traffic, and weather channels on subscription fee basis through two satellite radio systems.

[Related -Sirius XM Holdings Inc. (SIRI): Turning The Dial To $4.20 Per Share?]

SIRI's fortunes are tied tightly to car sales as its equipment is available in the top 20 selling cars and trucks. Various Sirius XM Radio subscriptions and trials are available in many of the top automakers vehicles, from Audi to Volkswagen. As you can see on the accompanying chart right below, SIRI's stock price tracks the price of General Motors Company (GM) and Ford Motor Co. (F). Is a post earnings selloff coming?


SIRI probably ended 2012 on a strong note as auto sales "held strong in December at an annualized 15.4 million units versus 15.5 million units in November," according to Econoday.

[Related -Sirius XM Radio Inc (SIRI) Q3 Earnings Preview: Turning Down The Dial]

The key metrics Wall Street will be watching Tuesday include new net-subscribers, churn rate, new vehicle consumer conversion rate, and average monthly revenue per subscriber (ARPU).

In Q3, new net-subscribers increased 33.6% year-over-year (YoY), from 333,683 to 445,921. Meanwhile, total subscribers grew to 23,365,383 from 21,349,858 for the three months ended September 30, 2012 versus 2011. The churn rate increased slightly from 1.9% to 2% as the new vehicle consumer conversion rate dropped from 45% to 44% YoY. 

ARPU probably delivered the best news of all as it grew to $12.14 from $11.66 in Q3 2012 versus Q3 2011. The trend for the key metric is headed in the right direction as Q2 ARPU was $11.97 and $11.77 for Q1. Based on the year's trend, iStock would expect to see average monthly revenue per subscriber move towards $12.30 to end the year. 

Management says, "These increases were driven primarily by the increase in certain of our subscription rates beginning in January 2012, and an increase in sales of premium services, including Premier packages, data services and streaming, partially offset by an increase in subscriber retention programs, the number of subscribers on promotional plans and a decrease in the contribution from the U.S. Music Royalty Fee due to the December 2010 reduction in the rate."

To get a sense of what Q4 subscribers totals might look like, iStock turned to Google Trends. Compared to Q3, searches for "Sirius XM" increased 6.7%. Meanwhile, queries for "Cancel Sirius" fell by 7.2%. With Google Trend numbers in hand, iStock guestimates that Sirius will have something in the neighborhood of 2.63 million Gross Subscriber Additions and 2.1 million Deactivated Subscribers. Tally is up, and we come up with 497,012 new net-subscribers and 23,862,395 Ending Subscribers. It will be interesting to see how close we get.

The bad news is management forecasts slower subscription growth for 2013 saying, "[we] SiriusXM set a post-merger record of 2 million net additions in 2012," but sees "Total net subscriber additions of approximately 1.4 million" for the year ahead.

Overall, iStock expects a solid quarter from SIRIUS XM Radio Inc. (SIRI) with a little upside potential, maybe a penny surprise. However, cautious management guidance and an overdue correction based on SIRI's previous correlation with GM and F could mean shareholders will be sing the blues, smile and turn away after the NASDAQ 100 member's quarterly profit checkup.


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