Coinstar, Inc (CSTR)
world with where you can do
just about everything wirelessly, it’s hard to believe that coin
and DVD rental kiosks are still flourishing.
Despite streaming movie heavies like Apple’s iCloud & AppleTV,
Netflix and Hulu, it seems that there is still a profitable market for
those with a opting to
get in their car and actually rent a physical DVD.
may be more than just nostalgia
in the DVD market; last Thursday Coinstar increased its earnings and
forecasts for its first quarter and full year, noting increased
at its Redbox movie rental kiosks. The
company cited high demand for popular movies like "Moneyball" and
"Puss in Boots" and others.
operates more than 35,500
Redbox DVD rental kiosks and 20,250 Coinstar coin-counting brands all
the country. Part of their strategy and success
is their strategic placement of their kiosks (DVD and coins) as well as
with other major companies like StarBucks, Lowes, CVS, Maggianos and
more. These partnerships not only allow Coinstar users
to get the entire value of their change towards a gift card, but the
and mutual relationships with other vendors add to Coinstar’s revenue
Netflix, they were able
to successfully raise the prices of their DVD and Blue Ray rentals.
There is a part of me that believes that Coinstar’s
ultimate fate would be the same as Blockbuster; but for now the company
and firing on all cylinders. Wall Street is getting behind its momentum
the stock to new heights.
A Blowout Quarter
Coinstar is due to report full Q1 earnings on April 26th, but
pre-released numbers last Thursday, sending shares 12%
of Thursday’s press release, the Zacks consensus estimates was for 87
share and revenue of $537.66 million in Q1.
Coinstar’s new range puts preliminary revenues in the range of $567
million to $569.2 million and diluted earnings per share in the range
to $1.66 per share; a huge leap above expectations.
While the pre-announcement takes some of the volatility factor
out of the
actual earnings report, it doesn’t mean that shares can’t continue
march. Investors will get the details of
the surge in earnings and hopefully reassurance that it will continue.
CSTR is a smaller mid-cap (2.04 billion) company that is trading at
times forward (expectations for next quarter) earnings. That valuation
the cheap side for a company with a growth history like Coinstar.
Their current PEG ratio is on the low side at
.86, which helps to prove the “value” argument.
just became a Zacks Rank 1
strong buy (again) on April 13th.
company reported a quarterly
sales increase of 12% at their last earnings report, Annual
sales were up 33%
compared to Q4 2010 with total sales of roughly 1.84 billion in
earnings jumped almost 108% from $1.57 in FY2010 to $3.26 in
CSTR is expected to earn $4.43 in FY2012
according to the Zacks Consensus Estimate.
Wall Street will get more specifics when we see the full report on
April 26th. For now, expectations are for CSTR to
generate $1.38 in income this quarter. Of the 13 analysts who
the consensus is for the company to grow earnings by 22.70% in the
(FY2012) and roughly 2.4% in FY2013 (look for revisions in these
the earnings report).
In terms of the magnitude of analyst estimate trends, we are
seeing all of
the consensus estimates higher than they were 90 days ago for the
next quarters as well as FY2012 and FY2013.
Even before the pre-announcement, analysts had made upward revisions to
the 2012 full year, Coinstar
management now expects:
revenue between $2.155 billion and $2.280 billion;
adjusted EBITDA from continuing operations between $465.0 million and
diluted EPS from continuing operations between $4.40 and $4.80 on a
fully diluted basis.
Coinstar is making all time highs as
the stock trades up towards
$70. While momentum is on its side, it
might be prudent to let the stock settle down a bit and find
If it holds the $65 dollar level, than we
could see another leg up.
Levy is the Senior Stock Strategist for Zacks.com. He is also the
charge of the market-beating Zacks