Redbox Owner Coinstar Advances on Profit, Rebranding

Coinstar Inc. (CSTR), owner of the Redbox DVD rental machines, gained the most in three months after efforts to squeeze more from its kiosks fueled quarterly profit that beat analysts’ estimates and the company said it plans to change its name to Outerwall Inc.

The rebranding reflects Coinstar’s effort to diversify beyond its namesake division, according to a statement yesterday.

“It’s really distancing the parent company from that coin- counting line of business,” Chief Executive Officer Scott Di Valerio said in an interview. The company will seek shareholder approval of the name at its June 27 annual meeting.

Coinstar is developing new automated businesses to maintain growth after demand for its $1-a-day DVD rentals peaks. The company owns 35 percent of Redbox Instant by Verizon, a streaming service, and is rolling out Rubi kiosks that offer fresh brewed coffee. Coinstar has also started selling tickets to concerts.

The stock rose 6.6 percent to $58.66 at 9:36 a.m. after trading at $58.85, for the biggest intraday jump since Jan. 25. Through yesterday, the stock had advanced 5.8 percent this year.

Excluding items, first-quarter profit totaled 93 cents a share, the Bellevue, Washington-based company said in a statement. That beat the 86-cent average of 11 analysts’ estimates compiled by Bloomberg.

Net income declined 58 percent to $22.6 million, or 78 cents a share, from $53.7 million or $1.65, a year earlier, Coinstar said. Sales rose 1.1 percent to $574.7 million, compared with the average estimate of $579.5 million.

Moving Kiosks

The company sought to improve Redbox’s performance by increasing the number of movies available and relocating kiosks from lower-performing locations, Di Valerio said. The actual number of dispensers didn’t change, staying at 43,700, said Di Valerio, the former finance chief who took over as CEO April 1.

For the second quarter, the company forecasts profit of 90 cents to $1.05 a share on revenue of $555 million to $580 million. That includes costs of 16 cents to close kiosks acquired from NCR Corp. (NCR) and added interest expense, the company said. Analysts were anticipating $1.21 a share, the average of 11 estimates, on revenue of $580.2 million.

For the year, Coinstar projects profit of $5.05 to $5.55 a share, on revenue of $2.39 billion to $2.55 billion. The full- year forecast includes costs of 61 cents for kiosk closings and interest.

Analysts project profit of $5.10 a share on revenue of $2.42 billion.

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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