Eastman Kodak's Profit Warning

Eastman Kodak said Monday that first-quarter profits will fall short of analysts' expectations, but the photo giant added that earnings should bounce back the following quarter.

Shares of the camera and film maker (EK) gained 3/8 to close at 65 5/8 in recent trading.

Kodak said several factors are skewing earnings in the first three months of the year, including a rising dollar, strong competition, difficult conditions in depressed overseas markets and the effects of incorporating a recent acquisition.

Kodak, a component of the Dow Jones Industrial Average, said it will earn 73 cents to 80 cents in the first quarter, below the 82 cents expected by analysts surveyed by First Call Corp.

In the second quarter, however, Rochester, N.Y.-based Kodak said earnings should jump to $1.50 to $1.59 a share, above the First Call consensus estimate of $1.45. The company, normally reticent about earnings projections, won't meet estimates despite ongoing efforts to cut costs and get rid of noncore operations.

For the full year, Kodak said its profits will range from $4.81 to $5.24 per share, compared to the First Call estimate of $4.98. A year earlier, the company earned $4.37, excluding special items.

By and large, Kodak, which has struggled in recent years, expects performance to improve in the second half of the year. The company said its $530 million acquisition of Imation's (IMN) medical-imaging unit should add to earnings after it is incorporated into its Health Imaging business. Kodak is also banking on improvements in overseas economies to stimulate demand.

The company, meanwhile, is moving swiftly to try to capture the lead in the burgeoning market for digital-imaging equipment, which allows photos to be altered and stored digitally in computers or on the Internet.

Yet tough competition, mainly from Japan's Fuji, has forced Kodak to cut prices domestically, and it doesn't expect to be able to raise them anytime soon.

Kodak is slated to release first-quarter earnings April 16.

Written By Jeffry Bartash, CBS MarketWatch