Kraft Foods (NYSE: KFT) is getting sliced and diced today -- falling by 12% in afternoon trading. The Oscar Mayer, Velveeta, and Capri Sun parent reported higher fourth-quarter earnings late yesterday, but warned about its fiscal 2003 results.

In its fourth quarter, Kraft earned $931 million, or $0.54 a share. It made $548 million, or $0.32 a share last year. On a pro forma basis, which excludes certain items and reports earnings as if Kraft has been public for all of 2001, the food company netted $0.51 a share versus $0.46, an outcome that fell short of expectations by a penny.

That huge 70% jump in reported net income was due in part to the Financial Accounting Standard Board's new 2002 rule about goodwill amortization, as well as to lower interest expense. Reported operating income, for example, only grew by 7.8% to $1.7 billion. Usually, we eye "pro forma" results skeptically, but in this case, they probably do paint a truer picture of what's going on at Kraft.

Revenues on a pro forma basis rose 3.1% to $7.83 billion, with worldwide volume growing 4.3%. New Oreo flavors (Have you tried the chocolate on chocolate ones? To die for...) and new sour-flavored Altoids helped out.

Melting the stock today, though, is what Kraft said about its 2003 results. Pointing the finger at Latin American currency issues, pension costs, and higher commodity prices, it lowered expectations for its 2003 earnings to $2.10-$2.15 a share. Analysts were looking for $2.25.

At current price levels, the stock's more attractive, trading at a forward P/E of around 15. That may still be a bit too rich and cheesy for true bargain hunters, however, given the company's reduced outlook.