Market Overview

Earnings Preview: Coinstar Still Cashing In


Coinstar (NASDAQ: CSTR) is scheduled to report third-quarter 2011 results Thursday, October 27, after the closing bell. The company's Redbox self-service DVD-rental business seems well positioned to pick up some of those customers who continue to abandon Netflix's (NASDAQ: NFLX) DVD-by-mail service following this summer's price change.

Analysts on average predict that Coinstar will report earnings of $0.88 per share, which is up 25.0% from the same quarter of last year. That EPS estimate is unchanged over the past 60 days. And note that Coinstar's earnings have not fallen short of consensus estimates in the past six quarters.

The consensus forecast also calls for the company to post revenues of $461.8 million, which would be a 21.5% increase from a year ago. Looking ahead to the current quarter, which will include the holiday season, analysts so far are looking for 23.0% year-over-year growth in revenues. And the forecast for the full year so far calls for revenues up 25.4% from a year ago, with per-share earnings 34.3% higher.

The Company

Coinstar provides automated retail services primarily in the United States, Canada, Puerto Rico, the United Kingdom, and Ireland. The Redbox business operates more than 31,000 DVD-rental kiosks, while the Coinstar business operates more than 18,000 self-service coin-counting kiosks. The company was founded in 1991 and has a market cap of $1.6 billion.

During the three months that ended in September, the company announced an additional $250 million in share buybacks, appointed a new member to its board and added videogames to an additional 5,000 Redbox kiosks.


The company has a long-term earnings per share growth forecast of 18.6% and its return of equity is 19.4%. While the P/E ratio is higher than the industry average, so is Coinstar's operating margin. The PEG ratio is 0.8. Eleven of 16 analysts who follow the stock consider it a Buy or Strong Buy, and they have a mean price target of $61.62 per share, which is more than 15% higher than the current share price.

The share price has surged about 26% in the past month but is still about 22% lower than the 52-week high of $67.56. The current share price is above the 50-day and 200-day moving averages. The stock has outperformed competitors such as Netflix and Western Union (NYSE: WU) over the past six months.

Action Items:

Bullish: Investors interested in exchange traded funds invested in Coinstar might want to consider the following trades:

  • Rydex S&P SmallCap 600 Pure Growth (NYSE: RZG) is more than 10% higher than a year ago.
  • iShares S&P SmallCap 600 Growth (NYSE: IJT) is about 10% higher than a year ago.
  • PowerShares S&P SmallCap Consumer Discretionary (NASDAQ: PSCD) is more than 5% higher than a year ago.

Bearish: Traders may want to consider these alternative positions:

  • ProShares UltraShort SmallCap600 (NYSE: SDD) is more than 7% higher than six months ago.
  • ProShares Short SmallCap600 (NYSE: SBB) is more than 7% higher than six months ago.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: analyst forecasts CoinstarEarnings Long Ideas Short Ideas Previews Trading Ideas ETFs


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