Kraft's

(KFT)

third-quarter earnings fell 4% from a year ago, pressured by higher ingredient and advertising costs. But the company affirmed full-year earnings forecasts and said while packaging and energy costs will rise in 2005, raw material and dairy costs should fall.

The publicly traded

Altria

(MO) - Get Report

unit earned $779 million, or 46 cents a share, in the quarter, including a restructuring charge of 2 cents a share. That compared with earnings of $810 million, or 47 cents a share, last year. Revenue rose 4.7% to $7.8 billion.

Analysts had been forecasting precharge earnings of 45 cents a share on revenue of $7.80 billion in the quarter. For all of 2004, Kraft sees earnings of $1.56 to $1.60 a share, excluding a 30-cent restructuring charge. Analysts had been forecasting precharge earnings of $1.87 a share in the year, according to Thomson First Call.

"The impact of changes in commodity costs and currencies in 2005 remains uncertain," Kraft said. "Within its commodities, dairy costs are expected to be lower than their record highs in 2004; however, energy and packaging are projected to be higher. The difficult retail operating environment experienced in certain regions in 2004, particularly in Europe, is expected to continue."

The stock rose 3 cents to $32.32 in after-hours trading Monday.