ROCHESTER - Eastman Kodak Co. said Thursday its first-quarter loss narrowed to $115 million as it battles for a bigger slice of digital photography after navigating a drastic, four-year overhaul. The results still missed Wall Street expectations and its stock fell more than 5 percent.

Hit by rising costs for raw materials, Kodak lost the equivalent of 40 cents a share in the January-March quarter, compared with a loss of $151 million, or 53 cents a share, a year earlier.

Sales rose 1 percent to $2.093 billion from $2.08 billion.

Excluding carry-over restructuring costs and other one-time items totaling $2 million, or 1 cent a share, operating losses came to $112 million, or 39 cents a share. Analysts polled by Thomson Financial expected, on average, a loss of 3 cents a share on $2.037 billion in revenue.

Its shares fell 92 cents, or 5.1 percent, to $16.97 in afternoon trading. The stock has traded in a 52-week range of $16.31 to $30.20.

Kodak blamed the shortfall on larger tax provisions, higher costs for aluminum and silver and increased inkjet printer investments in both its consumer photography and commercial printing businesses.

Digital sales rose 10 percent to $1.366 billion from $1.245 billion a year earlier, while traditional film-based revenue slumped 13 percent to $724 million from $830 million.

“They're obviously investing heavily in some of their growth initiatives like inkjet, but they're not able to squeeze enough costs out of the business to offset that,” cautioned analyst Shannon Cross of Cross Research in Short Hills, N.J.

“I think there will need to be more restructurings at some point - presumably smaller (ones) because they've had such massive ones.”

Chief Executive Antonio Perez said Kodak's “cost structure is getting better every day” and “I don't see any more than the $60 million-to-$80 million” in pre-tax charges already targeted for 2008.

“I am satisfied with our first-quarter earnings and cash performance as they are right (in line) with our expectations given our seasonality, and that gives me confidence for the full 2008,” he added in a conference call with analysts.

Sales in consumer digital imaging jumped 20 percent to $554 million, propelled by digital cameras and picture frames. But the division recorded an operating loss of $111 million, versus a loss of $75 million a year earlier, as it invested in its fledgling consumer inkjet printer business.

Graphic communications sales rose 4 percent to $812 million but operating losses came to $1 million, compared with a profit of $9 million a year earlier. Kodak attributed the decline mainly to higher aluminum costs and inkjet research costs.

Late this month, the company is aiming to shake up the commercial market with a 2,000-page-a-minute, highly customizable inkjet machine that delivers offset-print quality.

Sales in its film and photofinishing unit fell 13 percent to $724 million, partly reflecting higher prices for silver and the impact of the Hollywood writers' strike.

After accumulating more than $2 billion in net losses over three years, Kodak has posted net profits in four of the last six quarters.

Converting the bulk of its business from high-profit film to more highly competitive digital technology cost Kodak $3.4 billion from 2004 through 2007. It chopped its work force from 64,000 to 26,900, eliminating 4,275 jobs in 2007 alone and selling a health-imaging unit that employed 8,100 people.

Through 2011, Kodak has said it expects revenues to rise 5 percent a year, driven by a 10 percent to 12 percent annual rise in digital sales. Operating profits, it forecasts, will more than triple to $1 billion.