Famous maker of photographic equipment and supplies Eastman Kodak (NYSE: EK) reported earnings for the second quarter earlier this week, and they have not changed my opinion whatsoever on the stock. The shares are to be avoided at all cost.
Yeah, I've got to admit, I've been bearish on Eastman Kodak for a long time. It isn't difficult to hold such an opinion, of course. The company reported net income on a GAAP basis of $0.66 per share from continuing operations as opposed to a loss of $0.53 per share from continuing operations in the year-ago period. However, the results for the quarter include a gain of $0.88 per share from an IRS refund, offset by $0.09 per share in other items of net expense (this yields a net benefit of $0.79 per share). Considering that last year's Q2 was affected by a net of $0.92 per share due to restructuring charges (which were offset by gains on asset sales), it can be seen that the adjusted scenario isn't impressive in the least.
I just can't get past the utterly horrible story behind this company and its long-term performance. Simply put, Eastman Kodak just didn't adjust properly to the transition from film photography to digital photography as it was happening. It's trying to make amends, but it hasn't been easy. In fact, colleague Elizabeth Harrow recently wrote an informative article on the awful history of the company and how its stock has been one of the worst performers of the last decade. She discusses the impact of competition from businesses such as Sony (NYSE: SNE) and Canon (NYSE: CAJ), as well as the demand of one big stakeholder for management to expand its current buyback program.
Eastman Kodak may be trading at a yield above 3%, but this is no stock for dividend investors. The dividend has remained stagnant, and the cash flow during the quarter was not impressive at all. And even though revenue growth from digital businesses increased 10%, overall net sales went up by a lousy 1%. The stock is not too far off its 52-week low, and I don't want to touch it, not for a trade, and certainly not for an investment. It would be difficult for any bull to make an argument for Eastman Kodak, in my opinion.
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
8-02-2008 @ 8:49PM
Pat Kenmir said...
Famous maker of photographic equipment and supplies Eastman Kodak (NYSE: EK) reported earnings for the second quarter earlier this week, and they have not changed my opinion whatsoever on the stock. The shares are to be avoided at all cost.
First of all Kodak no longer makes photographic equipment. Other manufacturers are making the equipment now and Kodak just puts their name on it. Kodak used to make film, paper and chemistry, but that very large revenue stream is gone. Noritsu and Fuji USA are now the companies making this photographic equipment and Fuji USA made better film than Koadak in years past. Koadak started the Digital revolution for cameras because they needed a revenue stream and then the other manufacturers came on board and made BETTER Digital cameras. Kodak no longer makes anything and if they did it would be made in China. Kodak is on its way out.