XMSR Earnings Preview
Tuesday July 25, 4:38 pm ET, AP Earnings Preview
XM Satellite Radio Expected to Report Loss of 66 Cents Per Share in Tough 2nd Quarter
NEW YORK (AP) --
XM Satellite Radio Holdings Inc. reports second-quarter earnings Thursday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: The company has consistently reported losses despite steady revenue gains. The same is expected for the second quarter. Once a stock-market darling, XM has seen its share price battered in the period. A large decline came in May after the company cut its subscriber outlook to 8.5 million total subscribers at the end of 2006 from a previous forecast of 9 million.
Shortly thereafter, XM said subscriber growth slowed in the quarter to a net 398,000 -- down from 568,900 in the first quarter -- due to problems with product availability and softness in retail sales.
XM finished the period with a total of 6.89 million subscribers, still ahead of competitor Sirius Satellite Radio Inc.. But Sirius closed the gap, adding 600,460, pushing its total to 4.7 million.
On the regulatory side, XM said in May that it stopped making and shipping two radio models that the Federal Communications Commission said did not meet emissions standards. The devices use small FM transmitters that allow users to listen to XM's service through standard car radios.
Earlier in the quarter, XM said the Federal Trade Commission was investigating whether its marketing practices were in line with rules governing telemarketing, the Truth in Lending Act and other statutes. XM also faces a lawsuit filed in May by the Recording Industry Association of America, alleging XM's Inno recording devices, or MP3 players, infringe copyrights.
On Monday, the company named Nate Davis president and chief operating officer.
BY THE NUMBERS: Wall Street expects XM to report a loss of 66 cents per share on $221.5 million in revenue, according to a Thomson Financial poll of 30 analysts.
ANALYST TAKE:
UBS analyst Lucas Binder expects the company will lower its full-year subscriber targets when it reports. He recently cut the company's rating to "Neutral" from "Buy."
Bear Stearns analyst Robert Peck downgraded the stock in late May to "Underperform," saying the FCC issue "added to the uncertainty surrounding the stock." He expects a loss of 88 cents per share in the period.
Despite the problems, Merrill Lynch analyst Laraine Mancini said she thinks satellite radio "is a viable business model and represents one of the few secular growth stories remaining in the media sector." She rates the stock "Neutral."
STOCK PERFORMANCE: XM shares have been on a steady downward trend since April, shedding 36 percent in the quarter to finish June at $14.65. The stock has continued its slide in July, closing Monday's Nasdaq session at $10.88.
7/25/2006 08:51:00 PM
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