"Sirius XM reported mixed financial results for the second quarter of 2014, with its bottom line on par with the Zacks Consensus Estimate and the top line ahead of the same. Despite strong revenues, adjusted EBITDA, free cash flow and higher ARPU, Sirius XM is largely dependent on the future of the U.S. auto industry, which at present is poised for strong growth," the firm wrote.
"Therefore, even a minor fluctuation in auto sales may significantly affect the company's financials. To counter such overdependence, management has decided to foray into the telematics business. We believe that the acquisition of the connected vehicle services division of Agero will be a long-term positive for the company."
Sirius XM CEO Jim Meyer also discussed plans for tiered pricing at the Bank of America Merrill Lynch 2014 Media, Communications and Entertainment Conference on Tuesday.
Separately, TheStreet Ratings team rates SIRIUS XM HOLDINGS INC as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate SIRIUS XM HOLDINGS INC (SIRI) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SIRI's revenue growth has slightly outpaced the industry average of 8.0%. Since the same quarter one year prior, revenues rose by 10.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Media industry and the overall market, SIRIUS XM HOLDINGS INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Net operating cash flow has increased to $340.68 million or 24.74% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.81%.
- The gross profit margin for SIRIUS XM HOLDINGS INC is rather high; currently it is at 62.02%. Regardless of SIRI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.58% trails the industry average.
- SIRIUS XM HOLDINGS INC reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SIRIUS XM HOLDINGS INC reported lower earnings of $0.06 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($0.08 versus $0.06).
- You can view the full analysis from the report here: SIRI Ratings Report
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