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Kraft Foods (KFT - Free Analyst Report), the nation's largest food manufacturer, has posted better-than-expected results for the June interim. Indeed, share net of $0.60 for the period came in $0.08 ahead of our estimate and 7% above the year-earlier mark, thanks to a lower tax rate and a solid showing from the base operations (excluding candy maker Cadbury). This included strong sales in Europe and new developing markets and healthy, restructuring-related margin expansion.

In addition, Kraft reported that the Cadbury integration is running smoothly, and is now on track to generate at least $750 million in cost synergies when all is said and done. This is up from previous guidance calling for total savings of about $675 million. Furthermore, more than $100 million in savings will be realized in 2010 alone, which should help to offset higher promotional spending during the third and fourth quarters, as the company looks to bolster its soft North American cheese, biscuits, and dressings businesses.

Despite the earnings beat, we are keeping our full-year bottom-line estimate at $2.05 a share. This reflects cautious comments from management regarding the still-weak consumer spending environment and the heightened level of promotional activity throughout the sector. Plus, excess inventories at Cadbury and retailers' destocking initiatives will likely weigh on sales in the coming months. In 2011, we envision more rigorous growth (share net should reach $2.35), as the food giant benefits from recent product investments, improved macroeconomic conditions, and increased cost synergies from the Cadbury acquisition.

High-quality Kraft shares remain a good long-term holding for conservative investors. They also offer a nice dividend yield, making them suitable for income-oriented accounts as well.

About The Company: Kraft Foods is the largest branded food and beverage company headquartered in the United States and the second-largest worldwide. The company markets many of the world’s leading food brands including Kraft cheese, Maxwell House coffee, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, and Post cereals. While North America accounts for approximately 59% of sales, the food giant’s products are currently sold in more than 160 countries around the world. Among its more noteworthy acquisitions was the purchase of Nabisco in December of 2000 and Cadbury this past February.