Shares of Coinstar (NASDAQ: CSTR), parent company of DVD-rental group Redbox, skyrocketed Tuesday in early trading following a better than expected earnings report, a deal to buy competing NCR's DVD unit and an announced joint venture with Verizon.
Shares of the Bellevue, Wash.-based company rose 17 percent to $59.37 in early trading.
Net income surged 41 percent to $31.5 million, or $1.04 a share, solidly beating analyst expectations of $20.9 million, or 65 cents a share. Revenue rose 31 percent to $520.5 million, beating analyst expectations of $496.4 million.
The revenue jump came mostly from Redbox revenue growth, primarily reflecting new kiosk installations, strong performance of new release titles and consumer acceptance of the price increase implemented Oct. 31, 2011, the company said. Redbox has more than 28,000 DVD kiosks across the United States, and charges $1.20 for a movie rental.
Coinstar announced Monday it planned to buy Duluth, Ga.-based NCR's DVD business for as much as $100 million, which includes the purchase of DVD kiosks, certain retailer contracts and DVD inventory from NCR's entertainment line of business. The two companies will also enter into a mutual supplier agreement in which Coinstar will purchase goods and services from NCR.
Shares of NCR (NYSE: NCR) rose 6 percent to $20.17 in early trading.
Redbox also announced Monday it would collaborate with New York-based Verizon Communications to offer online streaming content. The company had discussed streaming initiatives since 2010 but had never introduced a service.
Details of the plans weren't released, but Verizon will own 65 percent of the joint venture while Redbox will own the other 35 percent.
A company as large as Verizon entering the streaming business could place pressure on Netflix, which has offered streaming since 2007. Nevertheless, shares of Netflix (NASDAQ: NFLX) rose nearly 2 percent to $131.53 in trading.
The strength of our core businesses provides a solid foundation that enables us to focus on key growth initiatives in 2012, including our joint venture with Verizon that was announced earlier today, Coinstar CEO Paul Davis, CEO said in a statement. We are delighted to be partnering with Verizon to offer consumers affordable entertainment in both physical and streaming formats and look forward to launching our service in the second half of the year.