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Analyst Raises Earnings Outlook for Redbox Parent Coinstar

21 Sep, 2009 By: Erik Gruenwedel

Merriman Curhan Ford analyst Eric Wold Sept. 21 upped the earnings estimates for Coinstar Inc., parent of kiosk rental operator Redbox.

The sale of its non-movie entertainment business, a pending fourth-quarter release slate and a $200 million convertible debt offering are all contributing to Coinstar’s boost.

Wold said Coinstar would generate $213.7 million in pre-tax (EBITDA) earnings for fiscal year 2009, up $800,000 from a previous estimate of $212.9 million.

The analyst said the fourth quarter would see significant new release DVDs, including Transformers: Revenge of the Fallen, Star Trek and Up, that generated about $4.3 billion in box office revenue — up mid-single digits year-over-year.

“With three of the top five DVD releases coming from ‘pro-Redbox’ studios, we think this bodes well for 4Q rental trends,” Wold wrote in a note. 

The analyst said the accelerated store closures announced last week by Blockbuster “bodes well” for Redbox customers and would contribute to a 3.4% increase in 2010 revenue per kiosk.

Wold expects Redbox to add 8,500 new kiosks in FY 2010, which is similar to 2009.

The analyst said the $200 million convertible debt should help provide additional capital to accelerate the growth of Redbox kiosks during 2010 and beyond.

“We consider this to be the Redbox IPO the company never had last year, which should help provide some additional capital to accelerate the growth of Redbox kiosks during 2010 and beyond,” Wold wrote.

Coinstar projects Redbox kiosks will earn $750 million to $850 million in revenue for all of 2009. In 2008, Redbox had a 9% share of the DVD rental market. As of June 30, that share stood at nearly 14%, with nearly 30 million DVDs being rented per month, according to the company.

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