Will Subscriber Growth Drive Sirius XM???s (SIRI) Q4 Earnings?

Sirius XM Holdings (NASDAQ:SIRI) is scheduled to report fourth-quarter results on Jan 31 before the market opens.

Last quarter, the company delivered a positive surprise of 50% with better-than-expected earnings and revenue performance. The bottom line soared 50% from the year-ago figure while the top line climbed nearly 8% year over year.

Let’s see, how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Sirius XM is likely to beat estimates this quarter on the back of its perfect combination of the two key ingredients:

Zacks ESP: Sirius XM has an Earnings ESP of +2.70%. A positive ESP indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sirius XM has a Zacks Rank #2 (Buy), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have significantly higher chances of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

What is Driving This Better-Than-Expected Earnings?

Sirius XM’s healthy net subscriber growth is anticipated to drive the results in the soon-to-be-reported quarter. Notably, the company has recently provided an update on its better-than-expected performance in 2017 with respect to self-pay subscriber additions. The company said that it added approximately 1.56 million self-pay subscribers last year, higher than its guidance of approximately 1.4 million additions.

This upside further led to the company ending 2017 with 27.5 million self-pay subscribers. While the comparable 2016 figure was approximately 26 million. Additionally, the company’s efforts to reward shareholders through dividends and share buybacks are encouraging. A detailed update on the issue is expected on the fourth-quarter conference call.

High costs might hit results in the fourth quarter like the previous one. The slowdown in auto sales might also ailthe quarterly report.

The company’s high-debt levels are another concern. Moreover, increased leverage coupled with stiff competition might act as headwinds for the company in the yet-to-be-reported quarter.

Other Stocks to Consider

Investors also interested in other stocks worth considering from the broader Consumer Discretionary sector may check out AMC Entertainment Holdings, Inc. (NYSE:AMC) , Activision Blizzard, Inc (NASDAQ:ATVI) and Churchill Downs, Incorporated (NASDAQ:CHDN) as these stocks possess the right combination of elements to beat on earnings in their next releases this time around:

AMC Entertainment has an Earnings ESP of +6.39% and a Zacks Rank #3. The company is expected to report fourth-quarter results on Feb 27.

Activision Blizzard has an Earnings ESP of +1.94% and a Zacks Rank of 3. The company is scheduled to release fourth-quarter results on Feb 8.

Churchill Downs has an Earnings ESP of +29.03% and a Zacks Rank of 1. The company is expected to announce fourth-quarter earnings on Feb 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

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