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TheStreet Open House

Why Outerwall (OUTR) is Jumping on Friday

NEW YORK (TheStreet) -- Outerwall (OUTR) was jumping on Friday after reporting better-than-expected earnings after the bell a day earlier.

By late morning, shares of the specialty retailer had surged 12.8% to $71.76.

The owner of Redbox recorded fourth-quarter net income of $1.68 a share, 44 cents higher than analysts surveyed by Thomson Reuters had expected. Revenue of $593.7 million, though 5.3% higher year-over-year, missed consensus by $1.64 million.

Fiscal 2013 per-share earnings of $5.92 exceeded consensus of $5.12 a share, while revenue of $2.3 billion was just shy of estimates of $2.31 billion.

"Our results reflect the value consumers recognize in our core Redbox and Coinstar brands, with Redbox driving over 775 million rentals in 2013 and Coinstar pushing through $300 million in annual revenue for the first time," said CEO J. Scott Di Valerio in a statement.

By segment, movie kiosk provider Redbox, its most profitable business, saw quarterly revenue increase 1.7% to $496.4 million and generated 192 million rentals over the three months. Self-service coin-counting machine business Coinstar increased revenue 8.4% to $80.7 million.

Over 2013, the company repurchased $195 million of common stock. In January, the board increased the share repurchase authorization by $500 million, bringing the total to $65 million.

For the March-ending quarter, Washington-based Outerwall expects revenue between $570 million and $600 million, with diluted earnings in the range of 77 cents to 97 cents a share. Analysts expected earnings of $1.06 a share on $592.71 million in sales.

Over fiscal 2014, management expects revenue between $2.358 billion and $2.498 billion, with diluted earnings of $5.16 to $5.76 a share. Analysts forecast earnings of $5.74 a share on $2.41 billion in revenue.

TheStreet Ratings team rates OUTERWALL INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate OUTERWALL INC (OUTR) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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