On Wednesday night, Eastman Kodak (NYSE:KODK) revealed results for the second quarter of fiscal year 2017. The report was far from picture-perfect, and management had to reduce its full-year guidance targets. Share prices plunged as much as 15.8% on the news in Thursday's trading session.

What went wrong? Let's find out.

35 mm film roll with a few inches of film pulled out of the container.

Image source: Getty Images.

Kodak's second-quarter results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$381 million

$423 million

(9.9%)

Net income from continuing operations

$7 million

$9 million

(22%)

GAAP earnings per share (diluted, from continuing operations)

$0.05

$0.18

(72%)

Data source: Eastman Kodak.

What happened with Eastman Kodak this quarter?

  • Kodak's largest operating segment, the print systems division, saw sales falling 3.8% year over year to $236 million. An intensely competitive printer market put pressure on top-line sales and rising aluminum costs also contributed to a drop in this segment's operating profits.
  • In the consumer and film division, revenue fell 24% to $47 million due to shrinking demand for consumer inkjet printers. That product line is now classified as a discontinued business, and Kodak is not doing any further development work in the consumer inkjet market. The segment was also up against a difficult year-over-year comparison due to a large industrial film order in the year-ago period.
  • Two of Kodak's seven business segments managed to grow their sales. Software and solutions revenues increased from $21 million to $22 million thanks to a 6% jump in unified workflow solutions license sales. Flexographic packaging revenue rose from $35 million to $37 million, powered by 22% higher sales volumes of Kodak Flexcel NX printing plates. Kodak is expanding a manufacturing facility in Oklahoma to increase its production capacity for this specific product, which is designed for large-scale print jobs such as newspaper publishing.

Based on the tough business trends seen in the second quarter, Kodak issued the following updates to last quarter's full-year guidance targets:

  • The midpoint of Kodak's new revenue guidance held firm at $1.55 billion.
  • Operational EBITDA profits are now seen landing near $97 million, down from roughly $117 million.

What management had to say

Eastman Kodak CEO Jeff Clarke is not giving up on the consumer division. That segment also accounts for commercial film products, the celluloid some filmmakers still insist on using in this increasingly digital age:

"Motion picture has a high profile, it's a product that's quite profitable for us, but it doesn't -- it's still only about 1/4 of the overall revenues in CFD. And so we're very pleased with the progress we're making, the pipeline of both motion picture film for a major motion picture, but also for television now," Clarke said in a conference call with analysts. "Last year, we really just had 2 television series, Westworld and The Walking Dead. Now we're up to 4 or 5. And so we're very pleased with some of the growth in that area."

It's a relatively low-revenue business, dwarfed by approximately $200 million in annual sales of films for printed circuit board production. But filmmakers and TV content producers are giving Kodak a taste of growing sales while the industrial business is shrinking.

Looking ahead

Kodak is doing well in a handful of product lines, but the overall business is suffering. I think the company's management team is smart to slow down and eventually close underperforming operations, doubling down on the parts that actually work.

That being said, Kodak's share prices have been cut in half since the start of 2017 and dropped 65% lower in three years. The company is barely profitable and the only clear path toward strong cash flows would involve shedding most of Kodak's remaining business operations.

Kodak has come a long way since filing for bankruptcy in 2012, but the company also has a long way to go before I would call it a reasonable investment.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.