Yesterday was a very good day for EastmanKodak (NYSE:EK) shareholders. While the Dow rose a little under 1%, shares of film pharaoh Kodak leapt nearly 4%. Someone, it seems, is expecting to hear some very good news coming out of Rochester on Monday, when Kodak reports its Q4 and full-year 2005 earnings.

Wall Street Wisdom:

  • General consensus. So who's the renegade buyer? There's only one analyst who likes the company enough to rate it a "buy." Three others rate the company a "hold," and five (count 'em, five) say "sell."
  • Revenues. Sales seem to be holding up just fine at Kodak. The analysts polled expect to see, on average, about 11% growth to $4.19 billion tomorrow.
  • Earnings. Profits are another matter entirely. The consensus is that in Q4 2005, Kodak earned half as much as the $0.78 per share it earned one year ago. (These results are obviously not GAAP-standard. The company actually recorded a net loss of $0.37 in the year-ago quarter.)

Margin watch:
As a matter of fact, Kodak has lost money under GAAP in each of the past four quarters. You can see the effects on its net margin line in the chart below, as the rolling past four quarters' results get dragged further and further down, finally plunging into the red.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

31.3

30.9

30.9

31.0

30.9

30.2

Op.

6.5

5.9

6.3

6.1

6.6

5.9

Net

2.1

4.5

4.1

2.9

0.9

(10.0)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
On the bright side, much of the damage has come from non-cash charges. Meanwhile, the company's gross margins have held pretty firm, and its operating margins haven't suffered much, either. If we ever reach a point where the firm takes a break from the "one-time" charges (ahem), Kodak shareholders might well see their company back in black.

Until that happy day comes, the company must keep plugging along, trying to reinvent itself for the digital age. To that end, it's laying out about $200 million per quarter in R&D spending. The R&D outlays have paid off in the past few days, as the company's new EasyShare camera garnered positive reviews in several publications, including yesterday's Wall Street Journal.

Now all we need is for the R&D to start showing results on the income statement.

Fool contributor Rich Smith does not own shares of any company named above.