Sirius XM (NASDAQ:SIRI) Exceeds Q4 Expectations

Satellite radio and media company Sirius XM (NASDAQ:SIRI) reported Q4 CY2024 results exceeding the market’s revenue expectations , but sales fell by 4.3% year on year to $2.19 billion. On the other hand, the company’s full-year revenue guidance of $8.5 billion at the midpoint came in 0.6% below analysts’ estimates. Its GAAP profit of $0.83 per share was 17% above analysts’ consensus estimates.

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Revenue: $2.19 billion vs analyst estimates of $2.17 billion (4.3% year-on-year decline, 0.7% beat)

EPS (GAAP): $0.83 vs analyst estimates of $0.71 (17% beat)

Adjusted EBITDA: $688 million vs analyst estimates of $645.9 million (31.4% margin, 6.5% beat)

Management’s revenue guidance for the upcoming financial year 2025 is $8.5 billion at the midpoint, missing analyst estimates by 0.6% and implying -2.3% growth (vs -2.8% in FY2024)

EBITDA guidance for the upcoming financial year 2025 is $2.6 billion at the midpoint, in line with analyst expectations

Operating Margin: 23.1%, up from 21.4% in the same quarter last year

Free Cash Flow Margin: 23.6%, up from 19.5% in the same quarter last year

Subscribers: 39 million

Market Capitalization: $7.41 billion

Known for its commercial-free music channels, Sirius XM (NASDAQ:SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.

The massive physical footprints of cell phone towers, fiber in the ground, or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their landlines and traditional cable subscriptions in favor of wireless communications and streaming video. These trends do mean that more households need cell phone plans and high-speed internet. Companies that successfully serve customers can enjoy high retention rates and pricing power since the options for mobile and internet connectivity in any geography are usually limited.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Sirius XM’s sales grew at a weak 2.2% compounded annual growth rate over the last five years. This fell short of our benchmarks and is a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Sirius XM’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.7% annually.

Story Continues

This quarter, Sirius XM’s revenue fell by 4.3% year on year to $2.19 billion but beat Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to decline by 1.9% over the next 12 months, similar to its two-year rate. This projection doesn’t excite us and suggests its newer products and services will not accelerate its top-line performance yet.

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If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Sirius XM has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 13% over the last two years, slightly better than the broader consumer discretionary sector.

Sirius XM’s free cash flow clocked in at $516 million in Q4, equivalent to a 23.6% margin. This result was good as its margin was 4.1 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

Over the next year, analysts predict Sirius XM’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 12.5% for the last 12 months will increase to 13.7%, giving it more flexibility for investments, share buybacks, and dividends.

We enjoyed seeing Sirius XM exceed analysts’ EPS and EBITDA expectations this quarter. On the other hand, its full-year revenue guidance slightly missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock remained flat at $21.70 immediately after reporting.

Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.