Coinstar Inc. (CSTR:US), owner of the Redbox movie-rental kiosks, fell the most in 18 months after second- quarter revenue growth missed analysts’ estimates.
The shares lost 14 percent to $51.16 at the close in New York. Coinstar reported yesterday that quarterly sales rose 22 percent to $532.2 million, falling short of the $545.7 million average of 13 analysts’ estimates.
Investors expected faster growth because Redbox is adding locations and customers as DVD rentals from competitors Netflix Inc. (NFLX:US) and Blockbuster decline. The company’s unit share of the DVD-rental market expanded by 8 percentage points to 42.5 percent from a year earlier, J. Scott Di Valerio, Coinstar’s chief financial officer, said in a telephone interview.
“We feel good about the strength of our quarter,” Di Valerio said. He said consumers had fewer DVD releases to choose from in the period, and more people kept movies out only one night.
Second-quarter net income rose 38 percent to $36.9 million, or $1.11 a share, from $26.7 million, or 83 cents, a year earlier, Bellevue, Washington-based Coinstar said yesterday in a statement (CSTR:US). Excluding items, profit of $1.25 compared with the $1.16 a share average of 12 analysts’ estimates compiled by Bloomberg.
The current quarter will see 23 percent fewer releases than a year ago, with titles that performed about 13 percent below comparable box-office results, Di Valerio said.
Even with the possibility that the Olympic Games in London may affect rentals, sales should increase from a year earlier to a range of $550 million to $575 million, Di Valerio said. Analysts project sales of $566 million, the average of 13 estimates.
Coinstar probably benefited from a decline in Netflix Inc.’s DVD rentals, and gained business from retailer Blockbuster, Ronald Bookbinder, an analyst at Benchmark Co., said in a July 24 research note. He also suggested some consumers may be cutting back on their cable TV service.
The shares had advanced 30 percent so far this year, as investors bet the company will benefit from the June purchase of NCR Corp. (NCR:US)’s kiosk rental business, which eliminated a large competitor, and the planned online video venture with Verizon Communications Inc. (VZ:US) starting this year.
The service, called Redbox Instant, is on track to begin selling a subscription plan that includes DVD rentals from Redbox kiosks, said Di Valerio, who declined to discuss pricing or a starting date.
Coinstar is responsible for 35 percent of the $450 million investment, Di Valerio said on a conference call.
In October, Coinstar raised the price of nightly rentals for standard DVDs to $1.20 from $1, saying costs were expected to go up because of debit-card fees. Prices for Blu-ray disks and video-game rentals didn’t change.
Last month, Coinstar announced a joint venture with Starbucks Corp. (SBUX:US) to sell Seattle’s Best Coffee in vending machines in the U.S.
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