Will Rising Costs Hurt SIRIUS XM (SIRI) in Q3 Earnings?

Sirius XM Holdings SIRI is scheduled to report third-quarter 2017 results on Oct 25, before the market opens.

Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate, while revenues beat the same. Both earnings and revenues improved on a year-over-year basis.

Let’s see how things shape up for this announcement.

Factors Likely at Play

Sirius XM’s bottom line in the third quarter is likely to be affected by a spike in costs. Also, the company completed the $480 million Pandora P investment in the third quarter. This is likely to further pressurize the bottom line. 

The slowdown in subscription growth may also hurt results in the third quarter. The company added 0.70 million subscriptions in the first half of 2017, significantly below the number, added a year ago.

The company’s high-debt levels are another cause for concern. Increased leverage coupled with stiff competition from rivals may also act as headwinds for the company in the third quarter.

However, the company’s efforts to reward shareholders with dividends and buybacks are impressive.

Earnings Whispers

Our proven model shows that Las Vegas Sands has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat in the third quarter. However, that is not the case as highlighted below.

Zacks ESP: Sirius XM has an Earnings ESP of +3.17%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though the company’s positive ESP increases confidence about an earnings surprise, its Zacks Rank #4 (Sell) leaves surprise prediction inconclusive.

Hence, we caution against all Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Sirius XM Holdings Inc. Price and EPS Surprise

 

Sirius XM Holdings Inc. Price and EPS Surprise | Sirius XM Holdings Inc. Quote

Stocks to Consider

Investors interested in the broader Consumer Discretionary sector may consider the following stocks with the right combination of elements to surpass estimates this quarter:

Discovery Communications, Inc. DISCA has an Earnings ESP of +0.61% with a Zacks Rank #3. The company will report third-quarter earnings on Nov 2.

DISH Network Corporation DISH has an Earnings ESP of +1.40% with a Zacks Rank of 3 as well. The company is expected to report third-quarter earnings on Nov 8. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Pandora Media, Inc. (P) : Free Stock Analysis Report
 
Sirius XM Holdings Inc. (SIRI) : Free Stock Analysis Report
 
DISH Network Corporation (DISH) : Free Stock Analysis Report
 
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