Earnings Scorecard: Eastman Kodak - Analyst Blog

Eastman Kodak Company (EK) reported improved numbers in the third quarter of fiscal 2010 on October 28. Management has reiterated its sales guidance for fiscal 2010 and expects it in the range of $7.5 billion to $7.7 billion, flat compared to the previous year.

Kodak expects losses from continuing operations in the range of $50 - $150 million, including $102 million in net charges for early extinguishment of debt in the first quarter of 2010.

Segment earnings from operations are expected in the range of $350 - $450 million and EBIT is expected within $275 - $375 million. For fiscal 2010, Kodak expects net cash used in operating activities in the range of $50 - $150 million and cash & cash equivalents in the range of $1.8 - $2.0 billion.

Earnings Review

Kodak reported improved results for the third quarter of fiscal 2010 with a loss per share (excluding one-time items) of 2 cents from a loss per share of 23 cents in the year-ago quarter. Reported loss per share was much better than the Zacks Consensus Estimate of a loss of 31 cents per share. Net loss came in at $5.0 million from a loss of $63 million in the third quarter of fiscal 2009.

Kodak reported sales of $1,758 million, representing a decrease of 1% year over year due to the negative foreign exchange impact of 2%. However, reported sales beat the Zacks Consensus Estimate of $1,614 million. The marginal improvement in the third quarter results was attributable to the gradual market recovery.

For details click on the link: Kodak Beats Zacks Estimate

Agreement of Estimate Revision

With the expectations of better results in the following quarters based on improved numbers in the third quarter and the gradual market recovery, 3 analysts of the 5 analysts following the stock for fiscal 2010, raised their estimates, while none reduced in the last seven days. For fiscal 2011, 1 analyst moved his or her estimate upward and no one downgraded their estimates. Thus, the overall the movement was positive.

Magnitude of Estimate Revision

For fiscal 2010, estimate went up to 36 cents from 23 cents earlier and for fiscal 2011, loss per share reduced to 8 cents from 17 cents.

Kodak has a mixed track record for earnings surprises with two positive and two negative in the preceding four quarters. However, the overall trend was positive with 128.61%, which means Kodak has surpassed the Zacks Consensus Estimate by that measure.

Our Take

We are encouraged by Kodak's numerous expansion programs combined with continuous product launches at competitive price points. Besides, Kodak's strategy to maintain a decent liquidity positionwith the expectations of $1.8 - $2.0 billion of cash & cash equivalents in fiscal 2010 boosts our expectations.

However, a highly competitive market and Kodak's huge exposure to volatile products pose immense risks. We maintain our Neutral recommendation on the stock. However, the stock currently retains its Zacks #2 Rank (short term Buy rating).