Outerwall (OUTR) Beats Even The Most Bullish Expectations; PT to $58 - B.Riley

B.Riley analyst, Eric Wold, raised his PT on Outerwall Inc. (NASDAQ: OUTR) to $58 after Q1 results came in ahead of his above consensus estimates. Better than expected growth across all three categories, expense control and a generous capital distribution program drove estimate increases and a nearly 20% increase in the PT.

Revenues of $536MM exceeded consensus of $508MM with upside in all three segments (Redbox, Coin and ecoATM. The company has implemented expense controls, some in Q1, that will have positive ramifications going forward. EPS of $2.44 came in above the analyst's $2.23 estimate, and was well above the consensus estimate of $1.35.

Redbox trends improved sequentially with a stronger disc release slate and reduced promo activity which drove up average transaction size. Redbox drove a Q/Q improvement in transactions/kiosk (+2.1%), average rental value (+2.1%) and revenue/kiosk (+4.3%).

The analyst is concerned that ecoATM may never become a major contributor to OUTR and the best decision may be to divest the segment. However, OUTR surprised with stronger results (revenues $42MM vs. RILY $35MM), reduced EBITDA loss ($5.3MM vs. RILY $6.0MM), a plan to drive $8.5MM in synergies and reach operating profitability in 2016.

Management has shown a commitment to driving shareholder value by repurchasing $57MM of senior notes for $45MM along with initially doubling the annual dividend from $1.20/share to $2.40.

No change to Buy rating with an increased price target of $58.00 (up from $50.00) in addition to a 6.0% dividend yield.

For an analyst ratings summary and ratings history on Outerwall Inc. click here. For more ratings news on Outerwall Inc. click here.

Shares of Outerwall Inc. closed at $40.08 yesterday.

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