Buried in Sara Lee's (NYSE:SLE) first-quarter earnings release was the company's outlook, including its concerns over "high raw material and packaging costs." My eyes have been trained to sift through pages and pages of facts and figures to find "the beef." I found what I was looking for on page 15 of the 21-page document (investors must be tireless in their pursuit of the truth).

I must admit that thoughts of frozen chocolate cake were dancing through my head when I locked in on Sara Lee this morning. Seeing that the company's first-quarter earnings of $0.44 per share were a penny better than expected (and ahead of last year's $0.29 a share) helped clear the initial hurdle. Sales were up 4.2% (as was forecast) as the company's shift to value-added meats overcame a 2% volume decline from its exit from underperforming noncore businesses, regional white bread softness, and lower unit volumes in pounds.

The first-quarter earnings were aided by a July 2004 payment of $117 million, or $0.15 per share, from the previous sales of the company's European tobacco business. If you "back out" that payment, first-quarter earnings would have been even with the $0.29 per share Sara Lee earned last year.

As I scanned through page 15 of the earnings release, management set its second-quarter earnings range at $0.35 to $0.40 per share; the sliced range now falls below the previous consensus estimate of $0.41 per share and will likely come short of last year's earnings of $0.39 per share. For fiscal 2005, Sara Lee forecasts earnings in the range of $1.61 to $1.71, which is on par with analysts' expectation of $1.66 per share and will likely exceed last year's $1.59 per share.

Sara Lee's struggles with higher raw material and packaging costs are also being felt by its competitors, Kraft (NYSE:KFT), General Mills (NYSE:GIS), and Kellogg (NYSE:K). The company has been struggling with higher meat and cotton costs, and, as a consumer, I have been struggling with the skyrocketing costs of almost every item I buy at the supermarket these days (it's a good thing my wife is the coupon maven).

Of course, it's not all gloom and doom for Sara Lee; the company is effectively cutting costs, consolidating various operating functions, and mulling the divestiture of some noncore brands. The fact is that Sara Lee is performing as well as or better than its industry peers and has a more attractive dividend yield (3.35%) than Kraft (2.53%), General Mills (2.86%), and Kellogg (2.34%).

Open your sharp mind, and don't wait for these other views to thaw:

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Fool contributor Phil Wohl spent more than 12 years on Wall Street and will never turn his fork away from chocolate cake. He does not own shares of any of the companies mentioned.