By Chandni Doulatramani

(Reuters) - Outerwall Inc reported third-quarter results above Wall Street estimates as its Redbox video rental kiosk business improved in the last few weeks of the quarter, and the company forecast full-year earnings above expectations.

Outerwall shares rose 8 percent in extended trading.

The company expects full-year adjusted earnings of $4.89-$5.04 (3.02 pounds - 3.11 pounds) per share, on revenue of $2.30-$2.33 billion.

Analysts were looking for earnings of $4.85 per share on revenue of $2.31 billion, according to Thomson Reuters I/B/E/S.

Outerwall said increased promotional activity helped traffic at Redbox in the third quarter.

Redbox generated 199.5 million rentals, the highest number of rentals Outerwall has reported in a quarter.

"The thesis that people aren't renting DVDs anymore is wrong, and people who don't have very much money find Redbox a compelling alternative to video on demand that cost twice as much," Wedbush Securities Michael Pachter told Reuters.

Pachter believes "Iron Man 3" helped the company's Redbox business where rentals increased 13 percent from a year earlier.

The company slashed its third-quarter and full-year earnings forecast last month as average transaction size fell below its expectations due to higher discounts.

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

Redbox offers self-service movie rentals at about 43,700 kiosks, where consumers can rent or purchase movies and video games.

Net income rose to $82.7 million, or $2.95 per share, in the quarter ended September 30, from $36.8 million, or $1.14 per share.

Excluding items, the company earned 97 cents per share.

Revenue rose 9 percent to $587.4 million.

Analysts had expected earnings of 88 cents per share on revenue of $575.3 million, according to Thomson Reuters I/B/E/S.

Outerwall shares were up 3 percent at $63.97 in trading after the bell. They closed at $61.98 on the Nasdaq on Thursday.

(Reporting by Chandni Doulatramani in Bangalore; Editing by Maju Samuel)

 

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