One of the most notable brand face-lifts of 2013 was when Coinstar changed its name (and stock symbol) to Outerwall (OUTR). At the time, you may have wondered why they didn't just call themselves Redbox, after their premier brand of DVD kiosks. But if you have read anything I've written about the company in the past few years, you know I saw something like this coming.
From my October 2011 article Coinstar Sees Red on Price Boost, here is the rationale I gave...
Innovation is About Knowing What Business You Are In
And speaking of machines that give you things when you put money in them, they've got ideas too, as this mysteriously close-to-the-vest quote implies: 'Our New Ventures segment is moving forward with our innovative automated retail concepts.'
Right on! They know they are in the consumer engagement business. I'm asking, 'What can't you sell out of a kiosk?' People love simplicity, convenience... and pressing cool buttons that give them candy, DVDs, and other fun things.
The Business of Convenience
Following my prescient views, in 2012 Coinstar rolled out the Rubi Kiosk to serve Seattle's Best Coffee. More on this in a moment as my enthusiasm about what the company could do with kiosk concepts of any color hasn't exactly turned into green.
Along with the name change in 2013 came their newest innovation, the ecoATM, which is tackling the problem of e-waste by recycling consumers' old phones, mp3s, tablets and more-and paying cash for most devices.
And I don't expect they are stopping the innovation there. As the company website proclaims, 'We transform empty spaces into exciting retail solutions that make life easier and less complicated for consumers - and more profitable for retailers. Powered by proven technologies and practices - and a great instinct about people - we're revolutionizing the way people shop and do business with a growing portfolio of products and services.'
The Earnings Outlook
As you can see in the 12-month EPS projection with price below, shares have ridden the upward trajectory of actual earnings and analyst estimates. But the path has often been bumpy and volatile.
Outerwall became a Zacks #1 Rank again last week after a wave of upward EPS estimate revisions hit in mid-December, bumping the 2014 consensus 6.5% to $5.72 from $5.37 and back to double-digit earnings growth of 13.5%. The catalyst was a corporate restructuring which actually had to do an about-face on a few innovations.
Here were the highlights from the December 10 press release announcing the company's intentions:
Plans to Exit Three New Venture Concepts Announces Leadership Transition at Redbox Implements Additional Actions Expected to Achieve $22 Million of Annual Cost Savings Increases Senior Secured Credit Facility by $350 Million to Achieve Target Net Leverage Ratio in Q1 2014