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Kodak meets 2Q forecast
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July 17, 2001: 1:58 p.m. ET
Profit down as sales, U.S. film market fall; 3Q guidance lowered
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NEW YORK (CNNfn) - Eastman Kodak Co. reported a sharply lower second-quarter profit Tuesday, yet matched Wall Street forecasts, as the world's largest maker of film reported declining sales in the slowing economy. The company also lowered its guidance for the third quarter.
Nevertheless, Kodak (EK: up $1.08 to $45.78, Research, Estimates) stock jumped in Tuesday trading following the announcement. One analyst attributed the pop to bargain-hunters who anticipate growth in the company's digital photography forays when the economy improves.
The company earned $325 million, or $1.12 a diluted share excluding special items, in the second quarter. That's in line with the forecast of analysts surveyed by earnings tracker First Call, but down from the $513 million, or $1.65 a share, in the year-earlier period.
Including special items, such as restructuring costs for cutting 2,400 positions worldwide during the quarter, net income fell to $36 million, or 12 cents a diluted share, from $506 million, or $1.62 a diluted share, a year earlier. The company said it will provide details of the other 1,100 job cuts announced in March with its third-quarter results.
Kodak said third-quarter earnings will be between 90 cents and $1.20 a share, citing concern that economic weakness in the United States is spreading to other markets, particularly Latin America. The First Call consensus forecast for the period is for EPS of $1.16, while the range of estimates runs from $1.09 to $1.30.
On a conference call with analysts, Kodak Chief Financial Officer Robert Brust said, "We see no signs of economic recovery yet anywhere."
Prolonged economic weakness could prove tough for Kodak, which is in an ongoing price-cutting battle against global rival Fuji Photo Film Co. Ltd. to retain its leading status in the United States, and to make inroads in China, where Kodak has invested heavily.
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Revenue of the Rochester, N.Y., photographic products company fell 4 percent to $3.59 billion from $3.75 billion a year earlier. Without the impact of a stronger value of the dollar compared with other currencies, the company said revenue would have fallen 2 percent.
Health imaging was the company's only segment to see a rise in revenue. Consumer imaging, primarily the film market being hit by the growth of digital cameras, saw revenue fall 9 percent in the period, or 6 percent when adjusted for currency rates. The company estimated that the overall market for film in the United States contracted 2 percent in the quarter, following a 1 percent decline in the first quarter.
Ulysses Yannas, an analyst with Buckman Buckman & Reid, said the company faced tough sales comparisons to the last few years when consumer film sales spiked after the company heavily marketed multipacks on retail shelves.
Despite the sluggish results and guidance going forward, Yannas believes the company is in a strong position to take advantage of the emerging digital photography field in which Kodak has been aggressively investing.
"The stock, any way you slice it, is attractive at this stage," Yannas said. 
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Kodak
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