Eastman Kodak Profit Up 23%

Eastman Kodak Co. said Wednesday its profit jumped 23% in the second quarter, better than Wall Street had expected, sparking a rally in the battered stock of the struggling company.

Kodak, which has been suffering through a financial slump as it restructures, said it earned $451.4 million, or $1.38 a diluted share, up from $368 million, or $1.11, a year ago.

The strength came despite an 8% drop in sales, to $3.54 billion, due partly to stiff competition from archrival Fuji Photo Film Co. of Japan and partly to the strong dollar, which erodes sales overseas.

The results from the world’s largest photography company beat analysts’ estimates of $1.13 a share, according to First Call, which tracks profit forecasts.

Kodak stock leaped $8.75 to close at $82.50 and was one of the biggest gainers and most active issues on the New York Stock Exchange.

Cost-cutting was the key for Kodak, raising its profit margin from operations to 18.5% of sales in the quarter, up from 14.3% a year ago.

The latest results exclude a pretax gain of 13 cents a share from the sale of part of Kodak’s stake in Gretag Imaging of Switzerland.

Kodak’s bread-and-butter consumer imaging business, which includes film, paper and chemicals, posted a 19% jump in operating profit even as sales fell 5%.

Sales in the consumer division fell 5%, while revenue in the commercial segment fell 11%.

Kodak said it sold 10% more film in the U.S. in the quarter, while the average price fell about 7%. That allowed the company to pick up 1 percentage point of U.S. market share since March 31 and to narrow the loss over the last 12 months to 1 percentage point.

Fuji has said it intends to capture 25% of the U.S. film market. It now has 18% while Kodak has about 65%.

Losses in Kodak’s digital imaging business narrowed to $64 million in the quarter from $102 million a year ago.

At a Glance

Other earnings, excluding onetime gains and charges unless noted:

AEROSPACE/DEFENSE:

* Northrop Grumman Corp. said its second-quarter profit rose 11% to $120 million, or $1.74 a share, from a year ago, beating analyst estimates by a penny. Sales fell 4% to $2.14 billion. Operating profit at its information technology and services unit jumped 39% on a 9.5% increase in revenue. The latest results exclude charges of $27 million, or 40 cents a share, for plant closures, costs related to Lockheed Martin Corp.’s proposed acquisition of Northrop and increased costs for its E-8C and E-2c programs.

* General Dynamics Corp. reported a 15% rise in second-quarter net income to $92 million, or 72 cents a diluted share, from a year ago, beating analyst estimates of 70 cents. Revenue rose 14% to $1.18 billion. The defense and aerospace company’s marine unit saw a 16% gain in operating profit of 16% on a 5.3% increase in sales, and its newly formed information systems and technology unit posted a strong operating profit of $13 million on sales of $196 million.

OTHER INDUSTRIES:

* American Airlines parent AMR Corp. said second-quarter profit rose 35% to $409 million, or $2.30 a diluted share, from a year ago, exceeding analyst forecasts of $2.25, on a strong increase in passenger traffic and decline in fuel prices. Revenue rose 6.4% to $5.01 billion. AMR also said it will buy back as much as $500 million worth of its stock, or about 5.6 million shares.

* Best Foods said second-quarter net income rose to $172.3 million, or 58 cents a diluted share, from a year ago, matching analyst expectations. The maker of such products as Knorr soups, Hellmann’s mayonnaise and Entenmann’s baked goods said revenue edged up 0.5% to $2.11 billion.

* Caterpillar Inc., the world’s largest construction-equipment maker, said its profit rose a less-than-expected 2.5% to $446 million, or $1.20 a diluted share, in the second quarter as weak Asian sales and higher costs offset strong U.S. demand. Revenue rose 15% to $5.60 billion. The results missed analyst estimates of $1.24.

* Freddie Mac’s second-quarter earnings rose 22% to $414 million, or 56 cents a diluted share, from a year ago, matching analyst estimates, as the company bought more home mortgages and its income from those loans grew. Net interest income on assets rose 16% to $535 million. Revenue rose 9% to $881 million.

* Fruit of the Loom Inc. said second-quarter profit more than tripled to $65.3 million, or 90 cents a diluted share, even as sales slipped 2% to $628 million, as the underwear maker benefited from its cost-cutting efforts. The results far exceeded analyst estimates of 80 cents. The company earned $20 million, or 26 cents, a year ago.

* Guidant Corp. said second-quarter profit more than doubled to $97.3 million, or 64 cents a diluted share, as sales climbed 73% to $487.8 million. The maker of cardiac pacemakers and coronary stents, which are spring-like devices used to prop open clogged arteries, beat analyst estimates of 58 cents. It earned $40.7 million, or 28 cents, a year ago.

* Mead Corp. said profit fell 19% to $40.2 million, or 38 cents a diluted share, from the year-ago second quarter, as a charge for an asset sale and some write-downs offset higher prices for most of its paper. Earnings from continuing operations were 60 cents a share excluding the pretax charge of $80.8 million, or 46 cents. The company declined to disclose the charges’ effect on net income. Analysts expected the paper products maker to earn 53 cents a share, including the Zellerbach business. Revenue, which excludes Zellerbach in both quarters, rose 4.9% to $1.05 billion.

* Nextel Communications Inc. said its second-quarter loss widened, though less than analysts expected, as revenue per customer rose for the nationwide provider of wireless phone services. Nextel said it lost $358.7 million, or $1.31 a share, greater than the loss of $261.6 million, or $1.08, a year ago. Analysts had expected a loss of $1.61. Sales surged 189% to $421.4 million from $145.9 million.

* Whirlpool Corp. posted a 31% jump in operating profit to $81 million, or $1.05 a diluted share, from a year ago, a penny higher than analyst forecasts, on strong sales in North America and a turnaround in Europe. The household appliance maker’s sales rose 25% to $2.59 billion.

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Bloomberg News and Reuters were used in compiling this report.