Outlook: AMC, Netflix, and Outerwall Are on the Rise
Movie Rental Industry
Key Redbox releases this year (with domestic box of fice total in millions from www.boxofficemojo.com):
o 2/4: Free Birds ($55), Escape Plan ($25), Runner Runner ($19), Closed Circuit ($6)
O 2/11: Ender’s Game ($62), Riddick ($42), Carrie ($35), All Is Lost ($6)
Key Redbox releases last year (with domestic box of fice total in millions from www.boxofficemojo.com):
O 2/5: Flight ($94), Here Comes the Boom ($44), House at the End of the Street ($32), Alex Cross ($26), Hit and Run ($14)
O 2/12: Taken 2 ($140), Looper ($67), Perks of Being a Wallflower ($18), Won’t Back Down ($5)
Over the next two weeks, there is one rental release that grossed over $50 million in domestic box office compared to zero last year. DVD rentals for the upcoming two-week period should outperform the same period last year.
Outerwall (NASDAQ:OUTR) announced a share repurchase program that is expected to result in significant earnings accretion in 2014. The $350 million buyback is likely to reduce diluted shares outstanding to around 21 million from last year’s 28 million, or over 20 percent. We expect the company to generate over $200 million in free cash flow in FY:14 and spend another $150 million repurchasing stock, further reducing share ount. Outerwall has cut costs by $22 million and has curtailed new venture spending, which should allow for solid profit growth in 2014, notwithstanding guidance for declining year-over-year net income on higher revenues.
Outerwall will likely continue to invest in its ecoATM business, and continue with a limited investment in SAMPLEit ($1 samp les in drug stores.) We expect ecoATM to be accretive to EPS by the end of 2014. Outerwall added $350 million of new debt, primarily for share repurchases, allowing it to move to its previously announced target net leverage range of 1.75 – 2.25x net debt-to-core adjusted EBITDA in Q1:14.