BELLEVUE, Wash. ? Coinstar's fourth-quarter earnings nearly tripled as its Redbox kiosks for renting DVDs picked up customers who stopped getting their discs through Netflix's rival service.
The performance announced Monday was far better than analysts projected, driving up Coinstar's stock by more than 13 percent in extended trading.
The results came a few hours after Coinstar Inc. announced it had formed a partnership with Verizon Communications Inc. to challenge Netflix in another home entertainment format ? streaming video to TVs and other devices with high-speed Internet connections.
Coinstar prospered during the final three months of the year, partly because Netflix Inc. has been de-emphasizing its DVD-by-mail rental service to concentrate on expanding its Internet video library. Netflix lost 2.8 million DVD subscribers during the fourth quarter, with many of them deciding to stick with Internet video streaming.
But Coinstar's showing suggests some of Netflix's former DVD-by-mail customers may occasionally rent discs from the 35,000 kiosks that Redbox has set up in more than 29,000 stores and fast-food restaurants throughout the country.
"I do think we are picking up Netflix customers," J. Scott Di Valerio, Coinstar's chief financial officer, said in an interview. "We have stayed focused on giving the customers what they want."
The influx of Netflix customers help offset some of the business that Redbox lost after raising its DVD rental prices from a $1 to $1.20 per say in October.
Coinstar was also able to negotiate lower processing fees on debit- and credit-card transactions during November and December, another factor that gave the company's earnings an unexpected lift.
The company, which is based in Bellevue, Wash., made $31.5 million, or $1 per share, in the quarter. That compared to net income of $11.7 million, or 35 cents per share, at the same time in 2010.
Analysts polled by FactSet had predicted Coinstar would earn 65 cents per share.
Revenue for the most recent quarter climbed 33 percent from the previous year to $520.5 million ? about $22 million above analyst forecasts.
Coinstar shares rose $6.64 to $57.20 in extended trading.
As usual, Redbox served as Coinstar's catalyst. Revenue at the rental kiosks surged nearly 40 percent to $446 million during the fourth quarter.
In a move to expand its DVD rental service, Coinstar said it is acquiring NCR Corp.'s 10,000 DVD rental kiosks and other entertainment assets for up to $100 million. Coinstar sees the NCR deal as a way to expand its DVD rental kiosks outside the U.S. The deal is expected to close in the third quarter of this year.
Coinstar is expecting Redbox's recent momentum to continue in the current quarter ending in March. Netflix, meanwhile, already has predicted it will lose around 1.5 million DVD subscribers during the same period.
Coinstar predicted its per-share earnings for the first quarter will range from 76 cents to 91 cents on revenue $530 million to $555 million. Analysts had forecast earnings of 86 cents per share on revenue of $517 million.
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