Coinstar Raises Outlook, Shares Rally (CSTR)

Coinstar Inc. (NASDAQ: CSTR) reported late last evening that its fiscal first-quarter profit slumped 58% as its top revenue contributor, Redbox DVD-rental business continued to show sharp decline in growth while higher expenses also weighed on the bottom line.

However, shares rallied about 8.15% in aftermarket hours as the movie and games rental Kiosk provider posted better-than-expected adjusted earnings. Revenue fell slightly short of Street’s estimate.

The company also said that it plans to seek shareholders’ approval to change its name to Outerwall Inc.

Looking ahead at the full-year, the Company upwardly revised its earnings guidance to $5.05 to $5.55 a share on revenue of $2.39 billion to $2.55 billion up from its earlier guidance of $4.91 to $5.51 a share on revenue of $2.38 billion to $2.56 billion.

For the fiscal first quarter, Coinstar reported a net income of $22.6 million or 78 cents a share compared to a profit of $53.7 million or $1.65 a share, in the year-earlier quarter. Stripping out onetime items such as losses linked to equity investments, adjusted earnings stood at 93 cents a share down from $1.39 a share, in the same quarter of last fiscal. Revenue for the period rose 1.1% to $574.7 million.

The Company had provided a guidance of earnings of 77 cents to 92 cents a share on revenue of $568 million to $593 million.

Revenue from the Company’s biggest top line contributor, Redbox, edged up mere 1% to $507.9 million, a sign that its once fast growing business is losing momentum.

Now in order to overcome this challenge, the Company is focusing on some new ventures, including new uses for its vending kiosks.

Total expenses during the quarter soared 7.5% due to higher input costs and installations of more Kiosks in the second half of the last fiscal.

For the fiscal second quarter, Coinstar is expecting earnings to come in the range of 90 cents a share to $1.05 a share on revenue of $555 million to $580 million. Analysts’ consensus estimate was for earnings of $1.21 a share on revenue of $580 million. The Company said that its bottom line will come under pressure due to its decision to shutter DVD Kiosks purchased last year from rival NCR along with expenses related to refinancing.