Eastman Kodak (EK) has been working like the dickens to build out what it refers to as its “digital franchise”, meaning stuff like digital cameras and the like. The idea is to move away from film. However, getting Wall Street to thoroughly warm to its story hasn’t exactly been easy as evidenced by the share price.

And based upon the second quarter results it reported on Thursday I’m not expecting the Street to cozy up to it anytime soon.

In the period ended June 30 the New York based company earned $495 million or $1.62 a share. That’s sharply lower than the $575 million or $2 a share it generated in the comparable period last year. However, per Reuters, “excluding special items related to restructuring costs, a tax refund and other one-time events, the company posted a loss of 13 cents a share.” Folks, that’s not too sharp as the Street was looking for a gain of 16 cents.

Perhaps not surprisingly the stock got spanked on the news.

With all of that in mind, here’s what concerns me:

First, while its consumer digital imaging group did see its sales shoot up 17% over the comparable period last year, the biz lost $49 million from operations. Honestly folks, if this group/digital is expected to turn the company around I’ve got to tell you I’m not overly encouraged. And I’ve got to tell you I have a hunch the analyst community isn’t either.

Second, its gross margins for the quarter came in at 23.5%, which is more than a 200-basis point drop from the 26.1% it reported in the comparable period last year. The reason: price increases in aluminum and silver. In short, I find this to be a problem because that’s a pretty big drop and frankly I don’t see too much in the way of relief coming down the pike.

Third, Kodak had expected operating earnings of $400 to $500 million. Now however, it said it “expects 2008 results to be in the lower end of that range.” Folks, I don’t even need to tell you that I don’t think that the investment community is going to be too keen on that. Based upon this I expect the stock to continue to get hit in the weeks ahead as anxious shareholders bail.

Finally, the only big positive I see in all of this is that the company may have the opportunity to pick up its stock on the cheap under its previously announced buyback program.

Eastman Kodak closed at $14.64, down $1.13 or 7.17%.