KODAK POSTS Q. NET LOSS,STOCK FALLS
KODAK POSTS Q. NET LOSS,STOCK FALLS
2005-04-24 at 10:08:00 am #9079
Kodak posts quarterly net loss, stock falls
NEW YORK – Eastman Kodak Co. posted a quarterly net loss
Friday as sales in its traditional film business fell faster than expected,
overshadowing solid growth in digital photography, and its shares tumbled as
much as 10 percent.
Revenue dropped 3 percent as traditional film sales
declined, particularly in China, and weakness at Kodak’s medical imaging group.
Film sales remain important to Kodak because the Rochester, New York-based
company is using the cash they generate to fund its switch to digital cameras,
printers and other products.
“I continue to think that the Kodak story is very risky,”
said analyst Shannon Cross of Cross Research. “They are juggling many balls, and
if one of them gets dropped, then their earnings get hit.
Kodak reported a first-quarter net loss of $142 million, or
50 cents a share, compared with a profit of $21 million, or 7 cents a share, in
the same period last year.
Excluding one-time charges of 53 cents a share, operating
earnings were 3 cents a share — well short of Wall Street views of 33 cents a
share, according to Reuters Estimates.
“We are disappointed in the results … (but) we will
deliver the (earnings) year we said we’d deliver,” said Chief Executive Dan Carp
on a conference call with analysts in which the company stood by its full year
2005 profit forecast.
Investors were not as optimistic. Kodak shares were down
$3.28, or 10.8 percent, to $27.12 on the New York Stock Exchange in late trading
after falling as low as $26.27 earlier in the session.
The decline accelerated after Standard & Poor’s cut
Kodak’s bond ratings to junk status. The agency said Kodak no longer warrants an
investment-grade rating, “given the accelerated decline in its core consumer
imaging business and the uncertain profit prospects of some of its emerging
digital businesses.” Kodak bonds were down about two percentage points late in
“PLENTY OF TIME TO RECOVER” – CFO
First-quarter revenue fell to $2.83 billion, short of
analysts’ forecast of $2.91 billion. Excluding the benefit of the weak U.S.
dollar, which boosts the value of overseas sales when they are converted into
dollars, revenue fell 5 percent.
Digital revenue now represents about 46 percent of the
total at Kodak, as the company slims down to compete in a brutal digital
photography market where low-cost Asian rivals dominate and margins are
Chief Financial Officer Bob Brust said Kodak stood by its
full-year outlook for operating earnings per share of $2.60 to $2.90, adding
that the first quarter is typically one of its weakest and that Kodak has
“plenty of time to the recover.”
Kodak said its traditional film business revenue declined
by 18 percent and continues to sees full-year consumer film volumes down as much
as 30 percent in the United States and 20 percent globally.
However, digital revenue grew 23 percent, led by cameras,
printer docks and do-it-yourself photo kiosks.
President and Chief Operating Officer Antonio Perez said
that after a soft performance in January and February, the company took actions
that resulted in a much stronger performance in March. He said this had renewed
his confidence that strength in digital sales and earnings this year would
outpace the weakness in traditional film.
“This is a growth story in its early stages, and you are
investing on faith at this point, not on the hard cash flows from a strong
traditional film business,” said Tim Ghriskey, chief investment officer of
Solaris Asset Management.
Shannon Cross noted that while Kodak may not be moving
gracefully into the digital marketplace, the company’s 2003 decision to do so
was the right move, although the transition could have started much sooner.
“The alternative was running the business to zero, and
shutting the lights out,” she said. “For a company with a history like Kodak,
that would be a tough (choice to make).”