5 Reasons to Love Coinstar
by Kyle Woodley | April 13, 2012 12:11 pm
Coinstar (NASDAQ:CSTR), operator of both its namesake coin-sorting business and the video rental Redbox kiosks, was up about 10% in midday trading Friday a day after releasing sunny preliminary first-quarter results ahead of its actual announcement.
That news is just one of a few reasons to get excited about Coinstar. Here’s a look:
- The Pre-Earnings Report: Coinstar expects to report quarterly revenues between $567 million and $569 million, as well as profits of $1.36 to $1.40. The former would beat analysts’ expectations of $538 million, while the latter would clobber estimates for 89 cents per share. CSTR also upped its fiscal-year forecasts to revenues of $2.16 billion to $2.28 billion and earnings of $4.40 to $4.80 per share, again above respective estimates of $2.22 billion and $4.09 per share. The company also pointed out that its DVD price hike hasn’t soured too many consumers, which is better than Netflix (NASDAQ:NFLX) was able to say last year.
- Consistent Earnings Growth: The revised quarterly EPS range, if hit like expected, is about triple the year-ago period’s 46 cents per share and would continue Coinstar’s years-long streak of earnings growth. The same goes with the annual forecast, which if hit would represent 22% to 33% growth over 2011’s EPS of $3.61.
- Decent Valuation: OK, maybe “love” is too strong for this one. Still, even after Friday’s run-up, Coinstar is trading for about 14.5 times expected 2013 earnings of $4.54 per share — well within acceptable levels.
- New Venture: In February, Coinstar said it was teaming up with Verizon (NYSE:VZ) for a joint venture pairing Redbox DVD rentals and on-demand streaming and downloadable video. The project is expect to launch sometime in the second half of this year and will give streaming video giant Netflix yet another headache to deal with.
- It’s Getting Away With a Scam: Don’t call the cops or anything, but Coinstar’s traditional coin business is practically predatory on the incurably lazy. For the sheer luxury of turning coins (accepted currency) into dollars (accepted currency), Coinstar collects about 10 cents on the dollar — with the fee waived if you get a gift card for one of its retail partners like Starbucks (NASDAQ:SBUX) or Gap (NYSE:GPS). This is no criticism of the company. We all pay for conveniences in some way, but short of bringing a water-cooler jug full of change in for conversion, using or rolling change is a pretty simple task. The Coinstar coin business is wildly unnecessary, but congrats to the company, because people aren’t getting less lazy.
Kyle Woodley is the assistant editor of InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley.
- CSTR: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSTR
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