Kraft (NYSE:KFT) released third-quarter earnings last week, and the Street wasn't impressed. Despite solid top-line growth, commodity price increases, along with higher energy costs, pushed operating margins lower now that transportation and packaging have become more economically burdensome. The news sent the global food and beverage giant's share price down near historical lows.

The company recently lowered its guidance for 2005 earnings to $1.68 to $1.71 per share. So although the short term doesn't offer much to get excited about, there are still a few ingredients left in Kraft's cupboard for making a tasty treat. In the last quarter, for example, revenues increased 4.4% from strong U.S. sales. And in the beverage business, sales increased 10.5% from products like Crystal Light and Fruit2O flavored water. For the snacks and cereals division, net revenues rose 4.6% from famous cookie brands like Oreo and Chips Ahoy!, Wheat Thins and Triscuit crackers, and Post cereals. The grocery division was the only group showing a decline, which was caused by the divestiture of the fruit snacks business. Overall, the company has been able to grow its top line.

In addition, Kraft's new products continue to be a hit and are on track to exceed $1.5 billion in gross revenues this year, with strong introductions from the South Beach Diet line, the Tassimo hot beverage system, and Oscar Mayer deli-shaved roast beef. In addition, developing markets grew nearly 10%, with great results from Latin America and Eastern Europe and a positive product mix further driving revenue growth.

However, Kraft's recent problems aren't specific to it alone. Some of the world's largest food-based companies, including Britain's Cadbury Schweppes (NYSE:CSG) and France's Groupe Danone (NYSE:DA), have warned that rising oil costs and commodities would eat away at profit margins for 2005. So Kraft's difficulties weren't really a big surprise to me. What did surprise me, however, was Kraft's statement that price increases lagged behind the rise in operational costs.

Other companies appear to be able to pass on some of the cost increases to the consumer. Nestle, for example, the world's largest food maker, recently reported solid earnings for the past nine months. Nestle has been adept at raising prices just enough to offset the higher prices in oil and raw materials. Other companies, such as consumer products maker Kimberly-Clark (NYSE:KMB) and appliance giant Whirlpool (NYSE:WHR), have also done a great job of managing costs in this inflated raw-material environment.

However, for Kraft, higher commodity costs for dairy, coffee, and nuts, combined with higher energy and packaging costs, lowered operating margins to 14.2% of revenue from 16% a year ago. Kraft is now estimating that commodity costs will be around $800 million higher than 2005, roughly $200 million higher than previously projected. Ouch!

It seems to me that Kraft's products are still in high demand. Perhaps the increased selling pressure on its shares might lead to a great buying opportunity. If Kraft can become craftier with its product price increases, investors might be willing to take a second look at the company. I, for one, am not ready to count out the company that dreamed up the Double Stuf Oreo.

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Kraft is a Motley Fool Income Investor recommendation.

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Fool contributor M.D. Mitchell is down the street at the local junkyard looking for some good trash. At The Motley Fool, life can be like an Oreo: Sometimes you're the wafer, and sometimes you're the cream. He owns none of the above companies.