Kodak Renews Walmart Contract - Analyst Blog

Eastman Kodak Company (EK) recently renewed its contract with Canadian subsidiary of Wal-Mart Stores Inc. (WMT), Walmart Canada Corp. The subsidiary is a leading photo retailer in Canada. The contract was renewed so as to that Walmart Canada remains Eastman Kodak'sprimary operator for retail photo kiosks and dry lab systems.
 
As per the agreement, Kodak will provide services to Walmart's behind-the-counter lab systems and instant photo kiosks. Further, Kodak will transform the traditional wet lab systems used in 100 Walmart Canada photo centers to KODAK Adaptive Picture Exchange (APEX) dry labs within a year.
 
As part of the business strategy, Kodak frequently engages in discussions with third parties regarding possible investments, acquisitions, strategic alliances, joint ventures, divestitures and outsourcing. The company may face integration and other risks related to the transactions, which in turn will have an adverse impact on its profitability.
 
Kodak operates in a highly competitive market and encounters aggressive price competition for all of its products and services from numerous companies globally. Kodak's direct competitors include Canon Inc. (CAJ), Sony Corp. (SNE) and FUJIFILM Holdings Corp.
 
Kodak also reported disappointing results for the second quarter of fiscal 2010 based on the continued weakness in economic conditions. Second quarter loss per share (excluding one-time items) was 51 cents, higher than the Zacks Consensus Estimate of a loss per share of 31 cents. Revenues were $1,569 million, a decrease of 11% year over year from $1,766 million in the same period of 2009.
 
The current situation is expected to continue and will negatively effect the operating results for the second half of fiscal 2010. Hence, for fiscal 2010, management expects revenues within the range of $7.5 billion to $7.7 billion, flat from the previous year.
 
Thus, we reiterate our Underperform rating on the stock. The short-term rating remains “Sell," equivalent to the Zacks #4 Rank.

 
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