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Coinstar Inc. - Momentum

Date : 04/26/2012 @ 8:00PM
Source : Zacks
Stock : Outerwall Inc. (MM) (OUTR)
Quote : 53.85  0.19 (0.35%) @ 10:05AM
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Coinstar Inc. - Momentum

CSTR 042612

Coinstar Inc. (CSTR)

Coinstar operates more than 35,500 Redbox DVD rental kiosks and 20,250 Coinstar coin-counting brands all across the country.  Part of their strategy and success is their strategic placement of their kiosks (DVD and coins) as well as their partnerships with other major companies like StarBucks, Lowes, CVS, Maggianos and more.  These partnerships not only allow Coinstar users to get the entire value of their change towards a gift card, but the subsidies and mutual relationships with other vendors add to Coinstar’s revenue and visibility.

A Blowout Quarter (Reiterated)
On April 16th, I thought Coinstar was worthy of a Zacks Momentum mention after the company pre-announced estimates much ahead than expectations which reinforced their strong growth and market share capture from the likes of Netflix. Given the actual results yesterday and the subsequent drop in price, the shares may still look attractive here.     

Shares were trading roughly $65 at the time that article was published. I noted in detail that “Coinstar is making all time highs as the stock trades up towards $70.  While momentum is on its side, it might be prudent to let the stock settle down a bit and find support.” 

Support came right at the 50 day moving average of about $62, which acted as a trampoline; sending shares back up towards the $70 mark.  At the time of this writing, shares were down in the post market to $65 a share, back around the same level.

Details of the Report
Ahead of yesterday’s report, the Zacks consensus estimate was for $1.42 per share, up from 87 cents just a few weeks ago.  Coinstar managed to blowout earlier estimates with Q1 (core diluted) earnings of $1.39, but missed the Zacks Consensus, which sent the stock lower.

There was no doubt the Coinstar is executing well. Consolidated revenue from their coin business and Redbox was $568.2 million, up from $424 million in the same quarter a year ago.  Diluted EPS from continuing operations of $1.65, an increase of 258.7% compared with $14.8 million, or $0.46 per share, in the first quarter of 2011. Q1 Core diluted EPS from continuing operations was $1.39 per share versus $0.46 per share in the same period last year.

Looking Ahead
On the call, executives reminded investors that the Redbox digital solution, which is a joint venture with Verizon will be pressing forward in 2012 as well as “the rollout of one to two of our new venture businesses.”  I wonder what will come next for CSTR?

 For Q2 2012, Coinstar expects consolidated revenue to come in between $525 million and $550 million; core adjusted EBITDA from continuing operations* between $114 million and $124 million and core diluted EPS between $1.09 and $1.24, Zacks Consensus Estimates were for $1.07 in Q2  core diluted EPS.

The stock is remains a Zacks Rank 1 Buy. 

 This Week's Momentum Zacks Rank Buy Stocks:

Tata Motors (TTM)
Watching the Q2 earnings season unfold, there is strength coming from transportation.  Here in the U.S., car and truck manufacturers, retailers and even shipping companies are delivering strong results on average.

Tata Motors is a slightly different company when compared to the typical US automaker.  With roots going all the way back to 1868, they are well known in India for producing no-frills economy cars for the masses, their “Nano” model is considered “The Peoples Car” of India. 

Around the globe they offer more economy and upscale brands of automobiles and provide transport and technology solutions for governments.

TTM is more of a conglomerate than just an autos company.  The Tata group comprises over 100 companies in seven sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Tata has operations in more than 80 countries and exports products and services to 85 countries all together.

Tata Steel is one of the top ten steelmakers and Tata Motors is one of the top five commercial vehicle manufacturers in the world. TCS is a leading global software company and Tata Global Beverages is the second-largest player in tea in the world. If that wasn’t enough Tata Chemicals is the world's second-largest manufacturer of soda ash and Tata Communications is one of the world's largest wholesale voice carriers.  Did I mention that they also own Land Rover and Jaguar?   READ FULL STORY

PPG Industries (PPG)
Even with the weakness in Europe, the coatings giant PPG is still seeing strong growth in the U.S. and other emerging markets, propelling it to new 52 week highs.   A majority of PPG’s business is derived from OEM automotive coatings and coating innovations since 1924.   Being that auto and truck sales have been relatively strong in recent months and the trends seem to be improving PPG may stand to benefit further from increased production of not just autos, but all types of manufacturing that requires their coatings.  They may be the automotive derivative trade you haven't thought of. 

PPG was recently featured in our Investment Ideas column for its healthy dividend yield and stable growth.  READ FULL STORY

Sonic Automotive (SAH)
Rarely will a stock that misses earnings estimates be selected as a momentum rank-buy; but given the details of the report, Sonic may have upside from these levels.

Sonic has held above its 200 day moving average and been in an upward trend since October.  Yesterday’s selloff following an earnings miss sent shares down roughly 9%, which may actually attractive buyers at  advantageous prices and allow the momentum in this stock to continue.  With a P/E of less than 10, a PEG ratio of 0.6 and relatively strong growth since the recession, Sonic’s shares may have value here.

Automotive sales have been on the rise over the past several months and the trend seems to be continuing according to sources. READ FULL STORY

Tractor Supply Company (TSCO)
 is operating on all cylinders. The farm and ranch retailer recently preannounced first quarter sales that topped $1 billion for the first time in the company's history. Shares of this Zacks #1 Rank (Strong Buy) continue to scream higher, hitting new all-time highs almost daily.

Tractor Supply Company operates 1117 stores in 44 states that supply products for recreational farmers and ranchers. The retailer focuses on the needs of those who live in rural areas, including tradesmen and small businesses.

The company offers merchandise in areas such as equine, pet and small animal products; hardware, truck and towing products; seasonal lawn and garden products; maintenance products; and recreational clothing and footwear.  READ FULL STORY

 Jared A Levy is the Senior Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

 

 


 
COINSTAR INC (CSTR): Free Stock Analysis Report
 
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