Kodak Plunges 25%; Polaroid Down, Too
Shares of Eastman Kodak Co. and Polaroid Corp. took a beating Tuesday after the shine on the industry’s “digital halo” was tarnished by an earnings surprise and euro worries.
Kodak shares tumbled 25%, the biggest decline since the stock market crash of October 1987. Per-share profit will be as much as 15% below the highest estimate given to analysts. Fourth-quarter profit forecasts may have to be revised lower if the current sales trend continues, Kodak said.
Kodak was counting on higher sales to offset the effects of unfavorable exchange rates, higher raw material costs and increased investment. The company is trying to maintain its leading position in the film market while investing in digital cameras and photography equipment. The botched forecast surprised analysts, some of whom questioned the company’s strategy.
The No. 1 U.S. film maker said third-quarter profit will be 20 cents to 25 cents a share less than the company’s $1.56 to $1.66 a share forecast. The average estimate of analysts polled by First Call/Thomson Financial was $1.60.
Retailers may have stopped stocking up on film because of concern about a slowdown in consumer spending, analysts said.
Kodak dragged down blue-chip stocks after reporting that its third-quarter profit would be more than 10% below the company’s previous forecast and its revenue would fall short too. Kodak shares fell $14.56 to close at $44.44 on the New York Stock Exchange.
Shares of Cambridge, Mass.-based Polaroid fell 94 cents, or 6%, to close at $13.75 on the NYSE.
Polaroid, the world’s No. 1 instant-photography firm, said unfavorable exchange rates are hurting third-quarter results, but sales are in line with the company’s forecasts.
The company wasn’t more specific about the impact of the euro on sales and profit. Polaroid is expected to earn 54 cents a share in its third quarter, according to analysts polled by First Call/Thomson Financial. The company is set to report its third-quarter earnings Oct. 19.
The concerns about the two companies emerged after a Monday research report by Salomon Smith Barney touted the momentum of the industry “on the heels of a digital halo effect.”
Kodak and Polaroid both have touted their digital products as a force for future growth. Polaroid said its sales are on track with third-quarter expectations, but acknowledged the weak euro is having a negative impact. Polaroid said it is working to offset that negative effect with cost savings.
At a Glance
* Cummins Inc., the world’s No. 1 maker of high-power diesel engines, said its third-quarter earnings will fall short of analysts’ expectations, making it the latest company to be hurt by a decline in the truck market. The company said it will earn about 65 cents a share for the quarter. The average estimate of nine analysts polled by First Call/Thomson Financial was 85 cents. The company’s per-share net income was $1.35 in the year-earlier quarter.
Declining demand for truck parts and a weak euro contributed to lower-than-expected results, the Columbus, Ind.-based company said. Last week Eaton Corp., the largest U.S. maker of truck transmissions, said it expects third-quarter profit to miss expectations. Also, ArvinMeritor Inc. said last week that it will earn less than forecast in its fiscal fourth quarter due to slowing truck output and Ford Motor Co. plant shutdowns.
Cummins shares rose 6 cents to close at $31.44 on the NYSE.
