UPDATE 2-Redbox operator Outerwall slashes forecast; shares slide

Mon Sep 16, 2013 6:34pm EDT

* Cuts Q3 core diluted earnings forecast to $0.82/shr to $0.94

* Reduces Q3 revenue expectations to $569 mln-$589 mln

* Shares fall 20 pct after the bell

By Chandni Doulatramani

Sept 16 (Reuters) - Outerwall Inc, operator of the Redbox video rental kiosks, slashed its third-quarter and full-year earnings forecast as average transaction size fell below its expectations due to higher discounts, sending its shares down 20 percent.

The heavy discounting drove consumers toward more single-night rentals, the company, earlier known as Coinstar, said.

"The revenue per person was less than they thought. They had many rentals, but fewer nights rented," First Analysis Securities Corp analyst Lawrence Berlin said. He has an "overweight" rating on the stock.

Dougherty & Co analyst Steven Frankel said the discounts were on single-night rentals.

Outerwall now expects core diluted earnings of 82 cents to 94 cents per share for the third quarter ending Sept. 30, down from the $1.36 to $1.51 per share it forecast earlier. The company is scheduled to report quarterly results on Oct. 24.

The company also lowered its revenue forecast to $569 million-$589 million from the $604 million-$630 million it estimated earlier.

Outerwall acquired Redbox for its DVD kiosk business in 2008, and it has become its primary source of sales since then.

Analyst Berlin also expressed concerns about the company's performance in the fourth quarter since many movies supposed to be released in the quarter have been pushed to later in the quarter or the first part of next year.

Outerwall cut its core diluted earnings to between $4.72 and $5.12 per share for the full year, from its previous estimate of $5.76 to $6.26 per share.

The company now expects revenue of $2.27 billion to $2.34 billion, down from its earlier forecast of $2.37 billion to $2.48 billion.

Outerwall shares were down at $45.00 after the bell. They closed at $55.97 on the Nasdaq on Monday.