Kodak Says Sterling Drug Purchase Won’t Hurt Profits

Eastman Kodak, under fire for purportedly overpaying in its $5.1-billion acquisition of Sterling Drug Inc., said Thursday that it expects to earn profits “well in excess” of the amount predicted by Wall Street analysts.

The effort to whip up enthusiasm fell short. Kodak was the most actively traded issue on the New York Stock Exchange on Thursday but managed to rise only 62.5 cents a share to $42. The stock had traded at $49.125 just before the Sterling deal was announced.

Analysts had lowered their 1988 earnings projections for Kodak by about 35 cents a share since Jan. 1, prompted mainly by Kodak’s announcement last month of the agreement to buy Sterling, the New York-based maker of Bayer aspirin, Lysol cleaner and prescription drugs.

“Based on what we have learned from Sterling and what we know about Kodak, we believe that reduction can be put back into analysts’ estimates,” Kodak President Kay R. Whitmore said in a prepared statement. “We’re very optimistic about the future,” he added in an interview.

Kodak did not speak out on Sterling until this week because its tender offer for Sterling shares was still pending. The offer expired Monday and Kodak is mopping up the final details of the acquisition.

Analysts who follow Rochester, N.Y.-based Kodak had continued to cut their earnings estimates as recently as Wednesday.

On Thursday, analyst Eugene Glazer of Dean Witter Reynolds said Kodak seemed to be trying to convince analysts that the firm would earn $4 a share or more in profit in 1988. He said he was likely to raise his estimate of $3.85 a share.

Last year, operating earnings were about $6.31 a share, although various special charges reduced net earnings to $3.52 a share.

The heavy load of debt Kodak took on to finance the Sterling purchase helped convince Standard & Poor’s and Moody’s Investors Service to lower credit ratings on the company to the lowest levels in its modern history.

Kodak has run into other troubles recently:

- Polaroid Corp. disclosed that it is seeking $5.7 billion in damages for Kodak’s infringement on its instant photography patents.

- A federal judge issued a temporary injunction blocking Kodak’s merger of its photo finishing operations with the Colorcraft Corp. photo finishing operations of Fuqua Industries Inc.

- Kodak admitted that its innovative 9-volt lithium batteries, which were supposed to have a shelf life of 10 years, don’t last that long.

Whitmore said the purchase of Sterling was consistent with Kodak’s strategy for chemical sciences, would give the company a “highly profitable revenue stream” and offers opportunities for cutting costs by eliminating overlaps.

“So--recognizing what we’re receiving--the price we paid is competitive, fair and indicative of Sterling’s inherent value to us,” Whitmore said.