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Redbox Parent Outerwall Beats Views, Not Negative Sentiment

Redbox movie rental kiosk operator Outerwall ( OUTR ) easily beat Wall Street’s expectations in the first quarter, but most analysts remained cautious on the stock. Outerwall stock rose 3.1% to 41.31 on the stock market today . Late Thursday, Outerwall said it earned $1.97 a share on sales of $536 million in the March quarter. Analysts polled by Thomson Reuters expected Outerwall to earn $1.33 a share on sales of $508 million. On a year-over-year basis, earnings per share fell 31% and sales fell 12%. Redbox generated 138 million rentals in Q1, down from 173 million rentals in the year-earlier quarter. The decline in disc rentals was driven by a secular shift to streaming video services such as Netflix ( NFLX ) and fewer Redbox kiosks in operation. Outerwall is planning to launch a new streaming video service called Redbox Digital, Variety reported last month . It would be the DVD rental firm’s second attempt in online video. It launched a streaming service called Redbox Instant in a joint venture with Verizon Communications ( VZ ) in early 2013, but it was shut down after about 18 months. Redbox contributed 79% of Outerwall’s revenue in Q1. The company’s Coinstar and ecoATM businesses accounted for the rest. “While share and debt repurchases and other forms of financial engineering are helping the EPS line, the secular decline in DVD demand and execution issues at Redbox are creating significant challenges,” Dougherty analyst Steven Frankel said in a research report Thursday. “We continue to believe that ecoATM isn’t scalable and the combination of box office volatility, shifting viewing patterns toward episodic TV, and the rise of streaming create significant challenges for Redbox.” Frankel rates Outerwall stock as neutral. Pacific Crest Securities analyst Andy Hargreaves reiterated his underweight rating on Outerwall late Thursday. “Outerwall expects Redbox transactions to decline 15% to 20% in 2016, a level that we expect to continue indefinitely,” Hargreaves said. “At this pace of decline, we believe the company will be at increasing risk of negative leverage against its fixed costs and per disc purchasing agreements.” RELATED: Redbox Owner Outerwall Doubles Dividend, Explores Possible Sale

These 3 Industry Groups Going Into May With Momentum

In April, commodity stocks led the market. But a few other industries also have made big strides and go into May with positive momentum. Three in particular are worth a look because they are now in the top 40 of IBD’s 197 industry rankings. The hospitals industry subgroup has rallied about 5% in April and ranked No. 4 in Friday’s edition, a huge surge from No. 156 just three weeks earlier, although Lifepoint Health ‘s ( LPNT ) plunge on an earnings miss hurt the group Friday. Is everyone getting sicker? In a sense, yes, or at least they are going to hospitals more. Universal Health Services ( UHS ) beat profit views Wednesday, citing a 12% rise in revenue at its acute-care hospitals in Q1 vs. the year-ago period. Patient admissions climbed 7.8% and what it calls adjusted patient days increased 3.5%. Hospital admissions in general have increased partly due to ObamaCare, which has increased the number of people with coverage. Universal Health is forming the right side of a long base. Other stocks in the group are deeper into price consolidations. Truck companies were up about 10% in April and rank No. 20 in Friday’s IBD. Last month’s quarterly results from Paccar ( PCAR ) and Oshkosh ( OSK ) catapulted the group. On Thursday, Oshkosh soared 13% after the truck manufacturer beat earnings expectations and raised its 2016 profit forecast. Oshkosh said its military truck business surpassed management’s expectations. Also, a “solid construction outlook” and a relatively mild winter led some truck-rental companies to make purchases earlier in the year than previously planned, boosting that segment. Paccar — which makes Peterbilt, Kenworth and other heavy trucks — issued a smaller drop in EPS (-7% to 99 cents) than thought Tuesday, sending its shares up 5%. The industry’s advance actually started in January, as it tracked the general market’s rebound. Earnings from Cummins ( CMI ) in January helped spark the rebound. The three stocks are forming the right side of patterns; no clear buy points show up on their charts yet. Mining and construction machinery companies were No. 14 in Friday’s rankings, as the group vaulted nearly 6% in April. Of only a half-dozen stocks in the group, Astec Industries ( ASTE ) is worth a look as shares find support in a pullback to the 10-week moving average. That support came thanks to the company’s earnings report Tuesday. Astec makes equipment for building, paving and mining. It missed sales estimates but beat profit views. No doubt, the construction machinery group has benefited from the rebound in metal commodities, but another factor is increased U.S. federal funding for roads and bridges.

Juniper Stock Yields To Softer Q1 Performance, Despite ’16 Optimism

The thrill of Juniper Networks ( JNPR ) management’s optimism, despite their Q2 guidance miss, seemed to wear thin on investors who started Friday with a 2.6% pop but watched their stock deflate all day along with the overall stock market. After Thursday’s close, Juniper, the biggest computer networking rival of No. 1 Cisco Systems ( CSCO ), disclosed refined first-quarter earnings and revenue growth that missed initial guidance. It surprised no one, since Juniper pre-annnounced similar numbers on April 11 while warning of delays from its big telecom service customers and some weakness in enterprise market demand for Juniper products, notably the EX Series ethernet switches and SRX Series next-generation data-center firewall. Indeed, Q1 enterprise sales fell 19% from Q1 2015, and telecom delays led service provider revenue to fall 16%, the company said. Juniper also guided Q2 below analyst Wall Street models. Nonetheless, CEO Rami Rahim was optimistic about the full year in his conference call with analysts after the earnings release, and investors seemed to key off that optimism early in the stock market today . But near the session’s close, Juniper stock was flat, near 23, 27% off a five-year high 32.39 set Nov. 4. Cisco stock was down 1.5% late Friday. “We are encouraged by improved visibility with respect to the timing of these (delayed telecom) deployments as well as some early and important design wins with our new products,” Rahim told the analysts. “We remain constructive on the full year 2016 and intend to continue to make progress toward our long-term financial model.” Having closed on its acquisition of BTI Systems on April 1, which should add about $12.5 million in initial quarterly sales, Juniper guided current Q2 revenue down 2.6% to $1.19 billion, plus or minus $30 million, yielding non-GAAP earnings per share of 44 cents to 50 cents, which at the 47-cent midpoint is down 11% from Q2 2015’s 53 cents. Analysts polled by Thomson Reuters had modeled $1.2 billion and 49 cents. For Q1, Juniper reported revenue up 3% to $1.1 billion and non-GAAP EPS up 16% to 37 cents. But initially Juniper had guided Q1 to $1.17 billion and 44 cents. Nomura analyst Jeffrey Kvaal lowered his price target on Juniper stock to 24 from 26, reiterating a neutral rating. “We found talk of new telco architectures and the need to diversify from telcos concerning,” Kvaal wrote in a Friday research note. “We have argued NFV (network function virtualization) is real, here and hurting routing — here is more evidence. We view telco as (about) 40% of sales. We found comments on linearity, product migrations and switch/router integration perplexing, even conflicting.” But William Blair analyst Jason Ader reiterated an outperform rating on Juniper stock, “based on our 2016 non-GAAP EPS estimate of $2.05,” or four cents more than consensus, he wrote in a Friday research note. “We continue to like the risk/reward equation for the stock in view of the operational improvements, capital allocation focus and likelihood of a second-half rebound in switching and routing,” Ader wrote.