Kraft Foods (KFT - Free Analyst Report), the nation's largest food manufacturer, posted mixed financial results for the third quarter of 2010. Share earnings of $0.47 for the period came in $0.02 ahead of our estimate, thanks to product-mix improvements, productivity gains, and good initial cost synergies stemming from the acquisition of British confectioner Cadbury. But revenues were on the light side, as volume trends in North America, where the company has been compelled to combat commodity inflation with strategic price hikes, remained on the weak side. Moreover, the food giant issued somewhat cautious top-line guidance for 2011, which seems to have disappointed some investors.

Indeed, for next year, Kraft now expects organic sales to be up at least 3.5%-4.0%, below its long-term target of 5%-plus annual revenue growth. We attribute the conservative guidance to pricing-related headwinds and the still-chilly consumer spending environment, especially in the U.S. That said, we are not overly concerned with management's cautious tone. And we think that Kraft will remain on a healthy growth track through 2011 and beyond.

In the years ahead, the company should benefit from overhead reductions, gross margin expansion, a stepped-up advertising program, and further cost and revenue synergies from the Cadbury deal. Advances in emerging markets ought to be big pluses, too, as Kraft looks to leverage Cadbury's large distribution infrastructure in places like India and China.

All in all, despite the top-line softness in the September interim, we still like this high-quality food issue as a long-term play. And we are maintaining our 2010 and 2011 share-net estimates at $2.05 and $2.35, respectively.

About The Company: Kraft Foods is the largest branded food and beverage company headquartered in the United States and the second-largest worldwide. The company markets many of the world’s leading food brands including Kraft cheese, Maxwell House coffee, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, and Post cereals. While North America accounts for approximately 59% of sales, the food giant’s products are currently sold in more than 160 countries around the world. Among its more noteworthy acquisitions was the purchase of Nabisco in December of 2000 and Cadbury this past February. 

* This report includes late-breaking news not reflected in our full-page review of this company.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.