Outerwall Cuts Outlook; Stock Crashes - Update

(RTTNews) - Automated retail solutions provider Outerwall Inc. (OUTR), previously known as Coinstar Inc., Monday cut its outlook for the third quarter and full year, citing less-than-expected growth at its Redbox segment and intense discount activity.

The news upset investors and shares of the company sank 18 percent in after-hours trading on the Nasdaq.

Although both rentals and revenue for Redbox increased in July and August, they missed expectations, said CEO Scott Di Valerio. Another impacting factor was the heightened discount activity that hurt average transaction size and drove consumers toward more single night rentals.

Outerwall now expects third-quarter core earnings of $0.82 to $0.94 per share and revenue of $569 and $589 million. It earlier estimated earnings of $1.36 to $1.51 per share and revenue $604 to $630 million.

Analysts polled by Thomson Reuters expect earnings of $1.45 per share on revenue of $609.43 million. Analysts' estimates typically exclude one-time items.

For 2013, the company now expects core earnings of $4.72 to $5.12 per share and revenue of $2.274 to $2.34 billion. It earlier expected earnings of 5.76 to $6.26 per share and revenue of $2.37 to $2.48 billion. Analysts expect earnings of $5.91 per share on revenue of $2.38 billion.

At its Redbox segment - which owns and operates self-service kiosks - rentals for July and August grew year-over-year 13.4 percent and 15.7 percent respectively. While Redbox sees rentals and revenue per kiosk to increase, it anticipates a third quarter adverse impact to net revenue per rental of $0.07 to $0.09.

Outerwall has adjusted Redbox's fourth-quarter target, with rental expectations reduced by 6.5 million rentals with many of these rents shifting to 2014. The segment is expected to grow 4 percent to 7 percent annually through 2015.

Outerwall said it is accelerating full review of its New Ventures initiatives, excluding ecoATM, to ensure they provide the appropriate level of risk adjusted returns.

The company plans returning a major portion of free cash flow to shareholders and is to repurchase an additional $100 million of common stock after the trading window opens in the fourth quarter.

Outerwall is set to release its third-quarter financial results on October 24.

Shares of Outerwall closed Monday at $55.97, down $1.33 or 2.32%, on a volume of about 864 thousand shares. In after hours, the stock fell $10.21 or 18.24%.