Stock Alert for Eastman Kodak Co. (EK)
Eastman Kodak Company (EK) engages in the sale of imaging products, technology, solutions and services to consumers, businesses and professionals. The Company’s products span digital still and video cameras and related accessories; consumer inkjet printers and media; digital picture frames; retail printing kiosks; APEX drylab systems and related media and services; and KODAK Gallery online imaging services. EK’s products also include prepress equipment and consumables; imaging sensors; workflow software and services electro-photographic printing equipment, consumables and service; commercial inkjet printing equipment, consumables and service, and document scanners.
| Share Statistics (10-Jan-11) | FY
2009 |
FY
2010 |
%
Chg |
Q4
2009 |
Q4
2010 |
%
Chg |
||
| Symbol | EK | Revenue, $Mn | 7.61B | 7.19B | -5.5% | 1.76B | 1.46B | -17.0% |
| Current price | $0.60 | Gross marg. | 23.2% | 27.1% | 16.8% | 27.0% | 14.2% | -47.4% |
| 52wk Range: | $0.36-$5.70 | Oper. margin | – | -6.1% | – | – | -11.9% | – |
| Avg Vol (3m): | 9,269,030 | Net margin | -2.8% | -9.6% | 242.9% | -2.6% | -15.2% | 484.6% |
| Market Cap. | 161.97M | |||||||
| Shares Outstanding | 269.95M | EPS, $ | 0.04 | -0.60 | -1600.0% | -0.16 | -0.69 | 331.3% |
Source: Reuters.com, SEC Filings.
Investment Highlights
Shares of the photo-imaging giant advanced as much as 65% Tuesday, with volume of 67.5 million shares traded, after the company announced the creation of a new business structure aimed at increasing productivity, reducing cost and accelerating its transformation into a digital company.
EK shares have dropped 8.3% in the last five days; 32.3% in the last month; and 89.3% year-to-date.
Under the new structure, the Rochester, N.Y.-based company has reduced its number of segments from three to two – the commercial segment and the consumer segment – which will both report into a newly created chief operating office. Phillip Faraci will head the commercial segment, while Laura Quatela will head the consumer segment, both of whom will have the title of co-president and chief operating officer and will report to chairman and CEO Antonio Perez.
“This new structure simplifies the organization, focuses it more precisely on our consumer and commercial customers, and puts the right people in place to capitalize fully on the tremendous technological capabilities of Kodak,” said Perez. “These business structure changes also allow us to allocate resources more productively, continue to significantly reduce administrative costs, and improve efficiency. We are confident that these changes will support our efforts to make the most of our opportunities.”
With the new structure, the commercial segment includes all of Graphic Communications Group (GCG) plus two product lines in FPEG – Entertainment Imaging and Commercial Film. The consumer segment includes all of Consumer Digital Imaging Group (CDG) plus three FPEG product lines – Paper & Output Systems, Event Imaging Solutions, the Consumer Film and the Intellectual Property business.
EK said its segment financial reporting will change this year, consistent with the organizational changes, beginning with the first-quarter 2012 results. At that time, the Company will provide, for comparative purposes, prior-year results for the commercial and consumer segments.
EK shares added almost 50% to close at $0.60. Over the last 52-weeks, the stock has reached a low of $0.36 and a high of $5.70. The stock is currently below its 50-day and 200-day moving averages of $0.83 and $1.83, respectively. As of Tuesday’s close, EK’s market capitalization stood at $161.97 million.
Financial Summary
EK reported third quarter 2011 sales of $1.462 billion, a 17% decrease from the year-ago quarter or only 5% when excluding the benefit of a $210 million non-recurring patent licensing transaction in the year-ago period.
Third-quarter digital revenue grew 3% excluding the year-ago intellectual property revenue and a 25% decline in the Company’s Digital Cameras & Devices business, which reflects the strategic decision this year to trade revenue for improved earnings. Revenue from the core digital growth businesses – Consumer and Commercial Inkjet, Workflow Software & Services, and Packaging Solutions – increased 13%, fueled by 44% revenue growth in Consumer Inkjet printers and ink, and 89% revenue growth in Packaging Solutions. The revenue decline rate for the Company’s Film, Photofinishing and Entertainment Group slowed to 10% in the third quarter.
On the basis of U.S. generally accepted accounting principles (GAAP), the Company reported a third-quarter loss from continuing operations of $222 million, or $0.83 per share, compared with a loss from continuing operations on the same basis of $43 million, or $0.16 per share, in the year-ago period. The results largely reflect the absence of sizable patent licensing revenue in this year’s third quarter versus the year-ago period and the continued secular decline of traditional products¸ partially offset by better operating performance, excluding non-recurring intellectual property revenue, in the Company’s digital businesses.
For the full year, the Company now expects its total revenue to be in the range of $6.3 billion to $6.4 billion, compared to its previous forecast of $6.4 billion to $6.7 billion. On a GAAP basis, the Company now expects earnings from continuing operations before interest expense, other income (charges), net, and income taxes in the range of a negative $300 million to negative $400 million, reflecting lower earnings and lower gains on asset sales. Previously, the Company forecasted GAAP earnings in the range of $50 million to negative $150 million.
|
Financial Strength (10-Jan-2011) |
Company |
Industry |
Sector |
S&P 500 |
| Quick Ratio (MRQ) | 0.89 | 0.70 | 1.14 | 0.76 |
| Current Ratio (MRQ) | 1.27 | 1.04 | 1.40 | 1.13 |
| LT Debt to Equity (MRQ) | – | 32.53 | 61.16 | 108.55 |
| Total Debt to Equity (MRQ) | – | 65.60 | 101.23 | 146.89 |
| Interest Coverage (TTM) | 4.81 | 0.00 | 0.34 | 26.66 |
Source: Reuters.com, SEC Filings.
Technical Analysis
Source: http://stockcharts.com
EK is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent levels.
The MACD for EK currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.
Comparative Analysis
| Company Name | Ticker | Price per | Mrkt. Cap. | P/E | P/S | ||
| Jan-10-2011 | symbol | Share, $ | $ Mn | 2011 | 2012 | 2011 | 2012 |
| Sony Corp. | SNE | 17.69 | 17.75B | n/a | 29.98 | 0.21 | 0.21 |
| Canon Inc. | CAJ | 43.32 | 52.05B | 16.73 | 15.47 | 1.10 | 1.07 |
| Photographic Equipment & Supplies Median | 16.99 | n/a | 1.10 | n/a | |||
| Eastman Kodak Co. | EK | 0.60 | 161.97M | n/a | n/a | 0.03 | 0.03 |
Source: Thomson Financial
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