Coinstar Shares Soared: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Coinstar (Nasdaq: CSTR  ) surged 19% today after the Redbox parent posted market-topping quarterly results and announced plans to acquire NCR's (NYSE: NCR  ) DVD-kiosk business.

So what: Coinstar's big fourth-quarter beat -- EPS of $1.00 versus the consensus of just $0.65 -- suggests that Redbox is gaining customers from rival Netflix, which lost 2.8 million DVD subscribers last quarter. When you couple that momentum with the decision to pick up another 10,000 kiosks from NCR -- also up big today on the asset sale and a blowout quarter -- it's clear that Coinstar is gaining a strong foothold in the space.

Now what: For full-year 2012, management now sees core EPS of $3.80-$4.30 on revenue of $2.08 billion-$2.25 billion. "Moving forward we are confident in our ability to execute enabling us to generate positive cash flows even as we fund our organic growth and strategic initiatives," CFO J. Scott Di Valerio said. However, with the stock now up about 45% over the past month, I'd wait for some kind of a pullback before buying into that optimism. 

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