1-Star Stocks Poised to Plunge: Eastman Kodak?

By Brian D. Pacampara | More Articles
February 1, 2011 | Comments (3)

Based on the aggregated intelligence of 160,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, photography products specialist Eastman Kodak (NYSE: EK ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Kodak's business and see what CAPS investors are saying about the stock right now.

Kodak facts

Headquarters (Founded)	Rochester, N.Y. (1880)
Market Cap	$984.2 million
Industry	Photographic products
Trailing-12-Month Revenue	$7.19 billion
Management	CEO Antonio Perez (since May 2005) CFO Antoinette McCorvey (since November 2010)
Return on Capital (Average, Past 3 Years)	10.1%
Cash/Debt	$1.62 billion / $1.24 billion
Competitors	Canon (NYSE: CAJ ) Hewlett-Packard (NYSE: HPQ ) Sony (NYSE: SNE )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 39% of the 695 members who have rated Kodak believe the stock will underperform the S&P 500 going forward. These bears include fellow Fool Rich Duprey (TMFCop), who is ranked in the top 20% of our community, and acegdl007.

Late last year, Rich brought Kodak's not-so-pretty picture to our community's attention: "Revenue gains are predicated on one-time, non-recurring infusions of cash. Actual product sales are declining. Spending too much time in court litigating dubious IP patents. Digital picture previews? Really?"

Over the next five years, Kodak's profits are expected to decline at a steep 12% per year. Most of its rivals are expected to grow at double-digit rates, including Canon (22%), HP (11%), and Sony (84%), as well as photo equipment stocks X-Rite (Nasdaq: XRIT ) and Ballantyne Strong (AMEX: BTN ) both clocking in with 15% expected growth.

CAPS member acegdl007 elaborates on the bear case:

After failing to embrace the digital revolution in photography, Kodak is hurting. Kodak is a well known brand name due to its history but I'm not sure what innovation the company stands to offer moving forward.

Without even paying dividends to stock holders, about the only thing I can see [Kodak] owners looking forward to is if someone buys out Kodak (a rumor that recently surfaced -- and occasionally comes and goes).

What do you think about Kodak, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On February 01, 2011, at 12:01 PM, LENNYG2 wrote:

NOT TO BE A NAY SAYER BUT, IF KODAK CUTS 3% OFF THEIR COST FOR OPERATIONS. THE
7 BILLION $ REVENUER WILL GO TO A PROFIT.
WHAT DO YOU THINK?
Report this Comment On February 01, 2011, at 8:28 PM, duncanreynaldo wrote:

Kodak is like the snake that's had it's head chopped off. It's dead but still writhing.
When a company snoozes for the last 40 years and tries only to protect it's cash cow, it is going to be torn apart by innovative competitors.
Kodak could have survived if it had not been such an arrogant organization. The entire culture of the company was "we're Kodak". ...."we're too big to fail"
At this point I don't think anyone would be interested in the company as a whole. It's worth nothing.
Report this Comment On February 02, 2011, at 8:14 AM, brgdriver wrote:

If Kodak wants to post a profit, the most efficient & fast way is to trim off the FATs at the top managements not the people spend their multi-years of 'Sweat & Tears' at Kodak...this will save millions $$$$. After almost 6 yrs of so-called 'restructuing', it actually killed the tradition Kodak's innovative R&Ds dept.& Kodak big family and ended up with many, many failed consumer products in the market. What's left? Many left over retirees from HP....what a joke!!! Greedy people stays on the top level at 343 State St.
Cie La Vie

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