Sirius Could Splash Its Cash

NEW YORK (TheStreet) -- Sirius XM(SIRI) reports first-quarter earnings early on Tuesday, and now that the company is profitable, investors are wondering whether CEO Mel Karmazin and his team will start giving back some of its hard-earned cash.

After the company's first price hike in its history earlier this year, as well as lower operating expenses, Sirius may have approximately $3 billion in free-cash-flow over the next few years, according to Maxim Group analyst John Tinker in a research report. But how it gets distributed is up in the air due to Liberty Media's ownership stake.

Once thought to be near bankruptcy following the merger with XM Satellite Radio and several high-priced talent acquisitions like Howard Stern, Oprah Winfrey, Martha Stewart and others, Karmazin and his team have cut debt, and free-cash-flow is expected to rise 73% year-over-year to $719 million, noted Maxim Group's Tinker.

Tinker believes Sirius will update investors on returning capital to shareholders, paying down debt or acquisitions, but "would not be surprised if Sirius downplayed the timing of the buyback as they may not want to help Liberty Media(LMCA) increase its 40% holding without paying up." He rates Sirius shares "buy" with a $3.20 price target.

John Malone and Liberty Media own 40% of Sirius after Malone's Liberty Media loaned Sirius $530 million in 2009 to essentially bail out the company.