Sirius XM (SIRI): Stock Likely to Beat Earnings in Q1

Sirius XM Holdings SIRI is scheduled to report first-quarter 2016 results on Apr 28, before market opens.

The company has not been able to beat the Zacks Consensus Estimate in any of the last four quarters. Also, the company posted lower-than-expected earnings in the first quarter of 2015 and in-line earnings in the rest of the quarters of 2015, with the average earnings miss being 8.33%.

However, the scenario is likely to change going by our proven model which hints at an earnings beat in the first quarter of 2016. This is because the company has the right combination of two key elements.

Zacks ESP: Sirius XM’s Earnings ESP stands at +33.33%. This is because the company’s Most Accurate estimate is 4 cents, whereas the Zacks Consensus Estimate is pegged at 3 cents per share. A favorable ESP serves as a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Sirius XM currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Sirius XM’s Zacks Rank #3 and +33.33% ESP makes us reasonably confident of an earnings beat.

Factors Likely at Play

We expect the company to report strong revenues in the first quarter on the back of healthy growth in its subscriber base. The company has already added 465,000 new subscribers in the first quarter of 2016, taking its subscribers tally to over 30 million.

Moreover, the company announced that self-pay net additions were 348,000 in the first quarter. Consequently, the self-pay subscriber base was 24.6 million. Moreover, advertising as well as equipment revenues should display growth in the quarter, thereby boosting the top line. However, the ongoing global economic fluctuations and the company’s excessive dependence on the auto industry may hurt its performance.

Other Stocks to Consider

Here are some other companies in the broader Consumer Discretionary sector you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Discovery Communications, Inc. DISCA, with an earnings ESP of +2.22% and a Zacks Rank #3. The company is scheduled to report first-quarter earnings on May 5.

Royal Caribbean Cruises Ltd. RCL, with an earnings ESP of +6.45% and a Zacks Rank #2. The company is scheduled to report first-quarter results on Apr 29.

Time Warner Inc. TWX, with an earnings ESP of +1.55% and a Zacks Rank #2. The company is scheduled to report first-quarter results on May 4.

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