At least you can't accuse the good people at Motley Fool Income Investor pick Kraft (NYSE:KFT) of spinning the news. The headline for the company's latest earnings release reads: "Kraft Foods Inc. Reports Mixed 2006 Results." Sadly, Kraft's last earnings release heralded "Mixed Third Quarter 2006 Results."

That's not the sort of language likely to make anyone excited about the packaged-foods outfit, and the latest numbers only add to investors' disenchantment. Still, 2007 is shaping up to be another year of major changes at the 103-year-old giant, which makes keeping a close eye on Kraft a prudent move.

Kraft's fourth-quarter revenue slipped 3% to $9.4 billion, while earnings per share, after factoring out one-time items, declined 8.9% to $0.51. Full-year results were more encouraging, with revenue up 0.7% to $34.4 billion and EPS up 3.2% to $1.94, after once again excluding some one-time items.

One-time items factor prominently in the earnings release because Kraft has been re-engineering for a few years now. The firm has shuttered numerous factories, cut thousands of jobs, and shuffled its brand portfolio. With all this asset-shifting, it's somewhat understandable that Kraft hasn't yet moved to a higher plane of growth.

Despite anemic growth, Kraft arguably is positioning itself to be a more focused, higher-growth entity. For example, dumping Milk-Bone pet snacks, Minute Rice, and Cream of Wheat will allow Kraft to concentrate on more vibrant brands such as Oreo cookies, while seeking out new faster-growth ventures like frozen pizzas licensed from California Pizza Kitchen (NASDAQ:CPKI). In addition, Kraft is paying more attention to ripe opportunities outside the U.S. It recently reacquired rights to key brands, including Oreo, Ritz and Chips Ahoy, in several fast-growing developing markets.

Furthermore, Kraft's management will soon have unprecedented freedom of action to chart the firm's course. Former PepsiCo (NYSE:PEP) executive Irene Rosenfeld, who was named CEO in June 2006, will also become the firm's chairwoman on March 30. That's the same day that Altria (NYSE:MO) spins off its 89% stake in Kraft.

There's no denying that Kraft has been a laggard, even compared to other mature food giants like Kellogg (NYSE:K), and 2007 is likely to be yet another transition year. Still, with all the changes afoot at Kraft, it would be a mistake to discount a turnaround.

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Foolish freelance writer Brian Gorman does not own shares in any the companies mentioned. The Motley Fool has a full disclosure policy.