Kraft (NYSE:KFT) to Raise Prices as Margins Squeezed

All things considered, Kraft Foods (NYSE:KFT) performed well in the last quarter, managing to meet expectations in a challenging scenario.

The company was able to generate earnings of $540 million, or 31 cents a share. While down 24 percent from last year in the same quarter, that was largely from the costs related to integrating Cadbury.

Minus costs, Kraft earned 46 cents a share, a penny off the 47 cents a share generated last year. That was the exact number analysts had been looking for.

Revenue jumped to $13.77 billion, a gain of 30 percent. Analysts had expected revenue to come in at $13.48 billion.

While Kraft cut boosted prices in the fourth quarter, they won't be enough to sustain profitability, said the food company, and they said more price hikes will be added throughout 2011.

All of that comes from commodity prices rising for corn, wheat, cocoa and sugar, among others.

Consequently, Kraft had to lower its EPS estimate for the year to 11 percent to 13 percent. In November they had estimated growth would be in the mid-teens.

Increases in prices won't help the company in the short-term, as it'll be several months before they start making a difference, so the latter part of 2011 will have margins return to wider levels.

Competitors Kellog Company (NYSE:K) and Sara Lee (NYSE:SLE) also recently announced they're going to be raising prices as well.