Something Brewing at Eastman Kodak? (EK)

January 13, 2010 by Douglas A. McIntyre

Eastman Kodak Co. (NYSE: EK) has been one of the greatest American brands and great American success stories…. of our parents’ lives.  For the last decade this has been a perpetual turnaround story with high hopes and promises.  Yet it has never turned around.  It was considered a value stock for some time as well, yet that is history now even after a large private equity investment.  It has done poorly in periods of growth and periods of recession.  Usually when you see us talking about Eastman Kodak you are hearing about how it needs a new CEO to replace Antonio Perez.  Today is a very different day because the stock and the options trading volume is highly unusual.

At 1:10 PM EST we have shares up 6.6% at $4.68, yet the share volume is only 2.7 million versus an average daily volume of 6.1 million shares.  That might be thought of as a sellers’ strike, at least until you take a look at the options activity.  Eastman Kodak has traded abnormal volume in the FEB2010 $5.00 CALLS at 21,656 contracts versus a prior open interest of a mere 2,517 contracts.  If you look at the Friday-expirations for JAN2010 in the $4.00 and $5.00 strike prices, the open interest there is just over 14,000 and 18,000 respectively.

Eastman Kodak was noted in a BusinessWeek article, but not really in a positive light.  The company did recently settle its camera dispute with Samsung, but that is not today’s news as it was known Monday.

Last night the company announced its earnings date as being on Thursday, January 28.  Maybe the thought is that if it did not issue an earnings warning at the same time that the quarter did not come in well under expectations.  It seems that fewer and fewer analysts cover the stock each year.  Of the few who cover it, Thomson Reuters has losses expected for all of 2009 and for all of 2010.

Something is being telegraphed here by this options trading.  On a fully leveraged basis, this would be representative of more than 2.1 million shares in equivalent trading power.  The 52-week trading range is $2.01 to $7.54.  Stay tuned…