Last week saw the newest annual earnings release from Sirius XM Holdings Inc. (NASDAQ:SIRI), an important milestone in the company's journey to build a stronger business. It looks like the results were a bit of a negative overall. While revenues of US$7.8b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 3.8% to hit US$0.20 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, Sirius XM Holdings's 15 analysts are now forecasting revenues of US$8.24b in 2020. This would be a satisfactory 5.7% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to leap 22% to US$0.25. Before this earnings report, analysts had been forecasting revenues of US$8.22b and earnings per share (EPS) of US$0.26 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$7.51, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Sirius XM Holdings, with the most bullish analyst valuing it at US$9.00 and the most bearish at US$5.25 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
In addition, we can look to Sirius XM Holdings's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Sirius XM Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 5.7%, compared to a historical growth rate of 11% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 4.0% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkSirius XM Holdings will grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sirius XM Holdings. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Sirius XM Holdings's revenues are expected to grow faster than the wider market. The consensus price target held steady at US$7.51, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Sirius XM Holdings going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Sirius XM Holdings's balance sheet, and whether we think Sirius XM Holdings is carrying too much debt, for free on our platform here.
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