Eastman Kodak Company (EK) reported EPS of 40 cents for the first quarter of fiscal 2010 from a loss per share of $1.34 in the year-ago quarter. However, EPS missed the Zacks Consensus Estimate of 90 cents. Net earnings were $129 million from a loss of $360 million in the first quarter of fiscal 2009.
First-quarter sales were $1.933 billion, 31% increase from the year-ago quarter, including 3% from a favorable foreign exchange impact.
Revenue from Consumer Digital Imagine Group businesses totaled $891 million, doubling the $369 million in the prior-year quarter, resulting from the completion of an intellectual property transaction and increased demand for consumer inkjet printer systems, kiosk media and digital plates.
Revenue from the Graphic Communication Group bloated just 1% to $611 million due to the increase in volume of digital plates. Film, Photofinishing and Entertainment Group’s revenue dropped 14% year over year to $431 million based on secular declines.
Gross margin grew by 500 basis points based on improvements in productivity, and favorable foreign exchange. SG&A expenses remained almost flat at $310 million compared to $313 million in the year-ago quarter. R&D expense was $79 million, down from $105 million in the first quarter of 2009.
At the end of first quarter of fiscal 2010, net cash used in operating activities increased $310 million to $471 million, while cash & cash equivalents increased by $200 million to $1.5 billion.
In 2009, the company announced plans to implement a targeted cost reduction program (the 2009 Program) to more appropriately restructure the organization in view of the current economic environment. The execution of the 2009 program had begun in January 2009, which will enable it to grow despite the difficult economic environment.
For 2010, management expects net earnings to fall within the range of $350 million to $450 million and revenue within the range of $7.5 billion to $7.7 billion.
However, strong competition poses a significant risk. The company also faces integration and other risks related to acquisitions, strategic alliances, joint ventures, divestitures and outsourcing of transactions. Moreover, a huge dependence on third party manufacturers and external suppliers could negatively impact top-line and bottom line results. Thus, we reiterate our Underperform rating on the stock.
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