Outerwall shares fall after cutting outlook

BELLEVUE, Wash. (AP) -- Shares of Outerwall Inc. fell 20 percent in after-hours trading Monday after the operator of Redbox DVD rental kiosks and Coinstar coin-counting machines cut its outlook for the third quarter and full year on weaker-than-expected demand for DVD rentals over the summer.

The Bellevue, Wash.-based company said it now expects third-quarter earnings between 82 cents per share and 94 cents per share. That's down from its previous forecast of $1.36 per share to $1.51 per share. Analysts, on average, expected earnings of $1.43 per share, according to FactSet.

Outerwall now expects revenue between $569 million and $589 million in the third quarter, compared to its prior estimates of $604 million to $630 million. Analysts expected revenue of $612.6 million, according to FactSet.

Earnings before interest, taxes, depreciation and amortization are now expected to be between $101 million and $109 million in the third quarter, compared to its previous estimate of $129 million to $139 million. Analyst expected earnings before interest, taxes, depreciation and amortization of $133.4 million, according to FactSet.

Redbox DVD rentals for July and August grew 13.4 percent and 15.7 percent respectively compared with the same period in 2012 but aggressive rental discounts hurt the company's results, said Outerwall CEO J. Scott Di Valerio.

"Heightened promotional discount activity, which added new customers during the quarter, had an adverse impact on the expected average transaction size and we believe drove consumers toward more single night rentals," Di Valerio said.

He said that the company will adjust its promotional strategy going forward.

For the full year, Outerwall now expects earnings between $4.72 per share and $5.12 per share, compared to its prior estimates of $5.76 per share and $6.26 per share. Analysts expected earnings of $5.83 per share, according to FactSet.

Outerwall cut its full-year revenue outlook to between $2.27 billion and $2.34 billion, compared to its previous estimate between $2.37 billion and $2.48 billion. Analysts expected revenue of $2.39 billion, according to FactSet.

Core adjusted EBITDA of $451 to $471 million, compared to prior estimates of $507 to $538 million. Analysts expected earnings before interest, taxes, depreciation and amortization of $497.5 million, according to FactSet.

Shares of Outerwall fell $11.16 to $44.81 in after-hours trading Monday. They fell $1.33, or 2.3 percent, to $55.97 during regular trading hours, before the release of the revised outlook.