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Kodak's pretty picture
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January 12, 1999: 11:33 a.m. ET
Stock gains on report of film sales growth, optimism about 4Q results
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NEW YORK (CNNfn) - Eastman Kodak and the people who own its stock don't need to say "cheese" to smile about all the holiday picture-taking that took place this season.
Kodak shares are up 3-1/4 to 78-1/2 midday Tuesday after a report in The Wall Street Journal indicated that 18 percent more 35-millimeter film rolls were sold during the holidays than were sold in 1997, with volume gains higher at Kodak than at its main rival, Fuji Photo Film.
The sales increase is attributed to price cuts that allowed the two giants to undercut the sales of private-label brands. In fact, the Journal says, the price cutting was so severe that Kodak dollar sales are expected to have declined despite the company's 27 percent gain in sales volume.
"The sales increase was not unexpected, but the size of it was surprising," says Theodore Kundtz, an analyst who follows Kodak for Lehman Brothers. "We expected good growth in the U.S., but Europe and the emerging markets remained weak."
The sales figures were revealed to industry officials Monday by IRI Data, Kundtz says. He says it's not quite clear how accurate the figures are, but that they "usually get the trend right."
Kodak officials weren't immediately available to comment on the Journal report.
The recent sales increase, seen as a sign that Kodak is consolidating its 70 percent grip on the U.S. film market, is coupled with the company's success in cost-cutting to make analysts optimistic about fourth-quarter results, which are scheduled for release later this week.
Kundtz continues to rate Kodak a strong buy and expects the company to report earnings of $1.18 a share for the quarter. The First Call consensus of analysts' estimates is $1.15 a share.
"Long-term, they have a good way to go in their cost-cutting effort," Kundtz says. "We see top-line (revenue) growth of about 5 percent."
"They've been hurt by (weak sales in) emerging markets," he adds. "But if that can turn around, they can achieve some good growth ahead."
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Kodak
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