The Worst Stock of 2010 Strikes Back

By Anders Bylund | More Articles
January 29, 2010 | Comments (3)

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How did Eastman Kodak (NYSE: EK ) respond to being crowned the worst stock of 2010? With blowout earnings and an immediate 25% share price jump, of course. Remember this day a year from now, when the real losers of the year have been revealed.

Ahem. Let's move along.

Kodak’s $2.6 billion of revenue was 6% above year-ago sales. Last year's $3.40 loss per share turned around to $1.36 of earnings per share from continuing operations. If Kodak's business is dead, the company never got the memo.

"Our momentum is returning, and our strategy is paying off," said CEO Antonio Perez. "We generated significant traction with our key digital businesses." And there's the touchstone: Digital photography may have killed Kodak's increasingly obsolete film-based business, but the company is adapting to become a force to be reckoned with in the digital age as well.

Kodak is swimming in shark-infested waters for sure, including Great Whites like Sony (NYSE: SNE ) and Canon (NYSE: CAJ ) . And when nearly every cell phone is also a camera -- and Kodak doesn't make phones -- the once-dominant photography company also has to compete with newcomers like Apple (Nasdaq: AAPL ) , Motorola (NYSE: MOT ) , and Research In Motion (Nasdaq: RIMM ) .

Kodak has found niches to exploit in photo kiosks, inkjet printers, and professional graphics, and also sits on a valuable patent portfolio built from decades of cutting-edge research. And the company is prepared to ride out a few Category 5 storms thanks to $2 billion in cash equivalents outweighing $1.2 billion of long-term debt.

I think Kodak is going to be just fine, and the market seems to agree. Do you still think Kodak will crash and burn in 2010? Tell me off in the comment box below, then. I can take it.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. He did once own some Kodak stock, but sold it all when digital cameras came in vogue. Apple is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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Report this Comment On January 29, 2010, at 3:08 PM, gwhitebeard wrote:

Eastman kodak has more surprises (IMHO) in store for 2010. Cash rich and more coming, look for some early debt payoffs and acquisitions! You mentioned the phone gap, well I believe that will be addressed sometime in the 2nd Qtr, PALM, are you listening?
Report this Comment On January 30, 2010, at 9:52 AM, duncanreynaldo wrote:

Hey Anders, one quarter does not make a solvent company. Especially when you drill down into what is making money for Kodak.
Remove the one time sell off of the OLED business (which only a year ago Kodak was touting as one of their saviour businesses) and the fact that their income from film is still the major contributor to their meager bottom line and you expose the emperor with no clothes. Stand by for 1st Qtr results and the ever present excuses about the bad economy as the main culprit in their problem company.
Their R&D has been cut (again) and they are running out of intellectual property to sell.
I wouldn't sell the farm to buy this company if I were you.
Report this Comment On January 30, 2010, at 8:49 PM, zoom909 wrote:

You are missing a few very important aspects and it looks like amateur approach. Stop talking about film, cameras, and printers.....
1. Kodak revenue is 80% digital at this point.
2. It's consumer business is less than 25% - do not compare it to Canon, RIM, etc.
3. Besides OLED, they also sold in 2009 the buildings in Vancouver, BC which contributed to the final balance

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