Analysts: Redbox to See Q2 Fiscal Gains

27 Jul, 2015 By: Erik Gruenwedel

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Redbox is projected to report a spike in second-quarter revenue (ended June 30), driven in part by last year’s price hike and improving release slate, according to analysts. Redbox, which is owned by kiosk vendor Outerwall, reports financials July 30.

Specifically, the Q2 release slate was up 23% with 37 titles from the previous-year period. The quarterly box office mushroomed 51% to $2.14 billion, according to separate reports from analysts Michael Pachter with Wedbush Securities, and Eric Wold with B. Riley & Co.

“We believe this will drive stronger Redbox revenue and margin flow through the recent price increase. We are now assuming a 5.8% increase in average kiosk revenue and pre-tax earnings margins of 20.8% vs. prior estimates of a 0.3% [kiosk revenue] uptick and 19.4% pre-tax margins,” Wold wrote in a July 27 note.

The analyst believes Redbox revenue will increase 4% to $569 million from a prior estimate of $547 million. Pre-tax earnings will increase 10% to $114 million from $103 million. Redbox, per policy, doesn’t give quarterly guidance.

Meanwhile, Pachter admits his 2.5% revenue uptick may be too conservative given Redbox’s price increases (25%-to-33% for DVD, Blu-ray Disc and video games, respectively) implemented late last year.

The analyst contends that with each 1% increase in Redbox revenue, parent Outerwall realizes 38 cents in earnings per share. Indeed, Pachter projects significant revenue growth through the rest of the year – fueled in large part by a strong box office in the first-half year.

“Given that, we think 2015 revenue is likely to grow by more than the 3.4% we have modeled,” he wrote in a July 27 note. “Q4 likely [will] wildly exceed our estimates given the strong summer release slate.” 

 

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