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Kellogg

(K) - Get Kellogg Company (K) Report

eked out a 2% rise in third-quarter net income, topping Wall Street's estimate, and boosted its earnings forecast for the year.

The breakfast and snack foods giant posted earnings Thursday of $281.1 million, or 70 cents a share, up from $274.3 million, or 66 cents a share, a year earlier. The latest quarter included 2 cents a share in stock options costs. Analysts polled by Thomson First Call expected earnings of 65 cents a share.

Kellogg, which in addition to its namesake owns brands such as Pop-Tarts, Morningstar Farms and Eggo, said third-quarter sales rose 8% to $2.82 billion from $2.62 billion last year. Excluding the effect of currency translation, internal sales growth was 6%. Analysts projected sales of $2.76 billion.

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In North America, internal sales growth was 7%, with a 3% gain in cereal sales and 11% sales growth in Kellogg's snack business.

Internationally, sales rose 8%, while internal sales growth was 5%.

Kellogg's gross margins fell 140 basis points because of higher commodity, fuel and benefit costs. The company said, however, that these costs were offset by reduced raw material and packaging costs, as well as productivity savings.

For the full year, Kellogg now sees earnings of $2.48 to $2.50 a share, up from its prior forecast of $2.45 to $2.49. The guidance includes 11 cents a share in stock options costs. Analysts expect earnings of $2.51 a share, excluding options.

The company also gave preliminary guidance for 2007, predicting earnings of $2.67 to $2.72 a share. Wall Street is targeting earnings of $2.75 a share for 2007.