Coinstar posts lower 3Q profit; shares tumble
BELLEVUE, Wash. (AP) — Coinstar's profit dipped about 1 percent in the third quarter, as the company's operating expenses increased and a decline in the number of new DVD releases and viewer competition from the Olympics dampened its Redbox rentals business.
The company also issued a full-year earnings and revenue outlook that fell short of Wall Street's expectations. Its shares fell nearly 7 percent in after-hours trading.
Coinstar said net income slipped to $36.8 million, or $1.14 per share, in the three months ended Sept. 30. That compares with net income of $37.1 million, or $1.18 per share, a year earlier.
Excluding a loss from equity investments, Coinstar's earnings amounted to $1.26 per share, the company said.
Revenue increased 16 percent to $537.6 million from $465.6 million a year earlier.
Analysts' average forecast called for earnings of $1.05 per share on $557.2 million, according to FactSet.
Despite the dearth of new DVD titles during the quarter and competition from the Olympics, Redbox still generated most of Coinstar's revenue. The segment's revenue grew nearly 18 percent to $459.5 million. But the gain was primarily due to higher prices and the addition of more kiosks since the same quarter last year.
J. Scott Di Valerio, Coinstar's chief financial officer, said company underestimated how the new release schedule, including several weeks with few new movies, and the record-setting Olympics viewership would affect Redbox's business during the quarter.
"We expect to improve performance in the fourth quarter and to finish the year in a strong position moving into 2013," Di Valerio said.
Coinstar plans to get the DVD rental kiosks to even more locations in the U.S. and expand them into Canada.
The company disclosed on Thursday that it has struck a new, multiyear pact with Warner Bros. Home Entertainment that will bring the movie studio's titles to Redbox kiosks 28 days after their retail release.
Financial terms of the deal were not disclosed.
Meanwhile, Coinstar's coin-exchanging kiosks posted higher revenue for the quarter.
The company said revenue rose 2.8 percent to $77.6 million. The business also benefited from the addition of more kiosks and an increase in the average transaction size.
For all of 2012, Coinstar expects adjusted earnings per share will range from $4.50 to $4.65, while revenue ranges from $2.19 billion and $2.24 billion. Even at the top end of the range, the forecast falls short of analysts' expectations.
On average, analysts have forecast Coinstar will report earnings of $4.91 per share on $2.26 billion in revenue for the year.
For the fourth quarter, Coinstar expects revenue will total between $552 million and $602 million, while adjusted earnings per share range from 62 cents to 77 cents. Wall Street is looking for earnings of $1.05 per share on $600 million in revenue for the quarter.
Coinstar shares ended regular trading down 64 cents at $43.23. The stock slid $2.98 to $40.25 in extended trading.