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Sirius Gets a Boost From Subscriber Growth, Share BuyBacks

Sirius XM Holding Inc. (NASDAQ: SIRI) reported its third-quarter results after the market close on Monday as $0.02 in earnings per share and $1.057 billion in revenue. That was against Thomson Reuters consensus estimates of $0.02 in earnings per share and $1.04 billion in revenue. In the third-quarter of the previous year, Sirius had earnings of $0.01 per share and revenue of $961.51 million.

The company gave guidance for the 2014 full year of approximately $4.15 billion in revenue, net self-pay subscriber additions of 1.25 million and total net subscriber additions of 1.5 million. The consensus estimates are $0.08 in earnings per share on $4.15 billion in revenue.

Net income was $136 million in the third quarter, or 117% higher than $63 million in the same period of the previous year.

Net subscriber additions in the third quarter were 432,817 bringing total subscribers up nearly 5% to 26.7 million. Self-pay net subscriber additions were 379,598, an increase of nearly 7% to 22 million.

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Subscriber acquisition costs per installation fell 22% year over year, to $35 from $45.

Year to date, Sirius has repurchased nearly $2.1 billion in its shares. David Frear, CFO of Sirius, commented on the share repurchases:

Share repurchases in 2014 total almost $2.1 billion, 2.5 times the $825 million of free cash flow we generated in the first nine months of the year. With the company’s leverage at 3.4 times before the anticipated conversion of our 7% Exchangeable Notes in early December and over $1 billion of undrawn capacity under our revolving credit facility, we retain substantial balance sheet flexibility to continue our capital returns and to capitalize on strategic opportunities that may arise.

Jim Meyer CEO of Sirius said:

We are very pleased with the performance of SiriusXM in the third quarter, and we are entering the fourth quarter with tremendous momentum. So far this year we have added nearly 1.2 million subscribers, grown our Adjusted EBITDA margin by more than five percentage points, and increased free cash flow by 32%.

Sirius was not given a key upgrade or downgrade recently, but Jessica Reif Cohen of Merrill Lynch reiterated her Buy rating and maintained the $5 price objective, which is the highest of all analyst price targets on Wall Street. Without full coverage, it is based on upside in new and used auto sales.

Shares of Sirius closed Monday down about 0.6% at $3.35. Following the earnings report, the initial reaction in the Tuesday’s premarket was positive, and shares were up fractionally at $3.37 shortly after the open.

The shares have a consensus analyst price target of $4.28 and a 52-week trading range of $2.98 to $3.89. Sirius has a market cap of around $19 billion.

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