Satellite radio and media company Sirius XM (NASDAQ:SIRI) met Wall Street’s revenue expectations in Q3 CY2024, but sales fell 4.4% year on year to $2.17 billion. The company’s full-year revenue guidance of $8.68 billion at the midpoint also came in slightly below analysts’ estimates. Its GAAP loss of $8.74 per share was 1,305% below analysts’ consensus estimates.

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Company Overview

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.

Wireless, Cable and Satellite

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.

Sales Growth

Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Over the last five years, Sirius XM grew its sales at a sluggish 4% compounded annual growth rate. This shows it failed to expand in any major way, a rough 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 1.1% annually.

This quarter, Sirius XM reported a rather uninspiring 4.4% year-on-year revenue decline to $2.17 billion of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection is underwhelming and illustrates the market believes its newer products and services will not accelerate its top-line performance yet.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because 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 $93 million in Q3, equivalent to a 4.3% margin. The company’s cash profitability regressed as it was 8.5 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Over the next year, analysts’ consensus estimates show they’re expecting Sirius XM’s free cash flow margin of 11.5% for the last 12 months to remain the same.

Key Takeaways from Sirius XM’s Q3 Results

We struggled to find many strong positives in these results. Its EPS missed and its full-year revenue guidance slightly fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4.3% to $26.23 immediately following the results.

The latest quarter from Sirius XM’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.