Q–Eastman Kodak Co. has been out of favor for some time now. Recent quarterly earnings were positive, possibly indicating a turnaround in the retooling of this company. What’s the current prognosis on Wall Street for Eastman Kodak stock?
A–Here’s the picture: While this famous maker of cameras, copiers, film and projectors benefited from cost-cutting measures in its first fiscal quarter, its bottom line suffered the negative effects of a strong U.S. dollar, weak emerging markets and a drop in consumer film sales.
However, first-quarter earnings of 69 cents a diluted share were in line with the First Call Corp. consensus estimate, which provided a positive pop in the company’s stock price.
The consensus recommendation on the shares of Eastman Kodak is currently a “buy,” according to Boston-based First Call. That includes three “strong buys,” four “buys” and four “holds.”
The company’s 1998 expected earnings growth rate is 21 percent, versus 18 percent for the recreational products industry. Next year’s projected 21 percent gain compares to 25 percent for its peers. The company’s five-year growth rate is estimated at 10 percent, versus 15 percent industrywide.
Kodak is “exploring options regarding the sale” of its Fox Photo Inc. unit, a chain of photography stores. Meanwhile, intense competitive pressures remain in its Consumer Imaging operations. Some analysts expect Fuji Photo Film Co. to surpass Kodak in world market share this year, also outselling it in the U.S. as it ramps up a new plant in South Carolina.
Q–I’ve followed your columns for some time and would like to know your opinion of the Excelsior Value & Restructuring Fund.
A–It has turned in some spectacular returns, thanks to gains derived from restructuring and cost-cutting at American companies.
The $437 million Excelsior Value & Restructuring Fund gained 52 percent over the past 12 months to rank in the top 7 percent of all midcap blend stock funds. Its three-year return of 35 percent put it in the top 2 percent of its peers, while its five-year annualized gain of 28 percent is the best of any diversified domestic stock fund.
“An investor shouldn’t be put off by this fund’s narrow-sounding name, because while it sounds like a sector fund, its underlying portfolio has stocks of different sizes and industries,” said Christine Benz, equity fund analyst with the Morningstar Mutual Funds investment advisory. “I would also expect it to be more resilient than some portfolios that are more cyclically oriented.”
David Williams, portfolio manager since 1992, looks for stocks he thinks are relatively inexpensive and have some sort of catalyst in place, such as a new manager or some kind of restructuring, Benz explained.
Its biggest sectors are technology, consumer staples, financials and consumer cyclicals. A “no-load” (no initial sales charge) fund, it requires a $500 minimum initial investment.
Q–I am curious about something. Each day I hear on television that such-and-such a stock reported after the bell huge losses or gains in earnings and that in after-hours trading its stock moved significantly. What is after-hours trading and how can John Q. Citizen get in on the action?
A–Many brokerages offer after-hours trading to clients through trading networks like the global Instinet (run by Reuters), ITG Posit and AutEx, permitting both market and limit orders.
In addition, the New York Stock Exchange and the American Stock Exchange have “crossing sessions” from 4:10 p.m. to 5 p.m. Eastern time when round lots of 100 shares are matched at that day’s closing price. The Pacific Coast Stock Exchange has an after-hours session closing at 4:50 p.m. and the Arizona Stock Exchange also carries out a match of orders at 5 p.m.
SelectNet, a subsystem of Nasdaq, has similar trading after the close and before the open of trading, but only for over-the-counter stocks. In addition, third-market dealers often carry out trading for institutional investors after hours.
“We allow customers to trade over-the-counter stocks after hours using SelectNet, and we also do a `crossing session’ on the NYSE or AMEX from 4:05 until 5 p.m. Eastern time in which buy orders are matched with sell orders,” explained Gill Cyester, trading manager for Charles Schwab & Co.
The downside of trading after hours is that there isn’t as much liquidity as during regular hours, Cyester noted, so you’re not going to be guaranteed any executions. The over-the-counter markets are especially illiquid.
“Use extreme care in after-hours trading because it is usually event-driven and very violent,” warned Richard Schenkman, executive vice president of Instinet.
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Andrew Leckey, a financial anchor on the CNBC Cable Television Network, answers reader questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J. 07450 or by e-mail at successinv@aol.com.
