In another example of earnings growth in the face of a declining top line, Kellogg ( K) said its first-quarter profit increased 2% -- ahead of analysts' estimates -- even while sales fell by 3%, hurt by a stronger dollar.

At the opening bell Thursday, shares of Kellogg jumped 5% on the news, trading recently at $41.56.

The Battle Creek, Mich., company posted earnings of $321 million, or 84 cents per share, well above the 79 cents a share Wall Street was expecting, according to a poll of analysts by Thomson Reuters.

In the year-ago period, Kellogg earned $315 million, or 81 cents per share.

The peanut-butter salmonella scare early in the first quarter, which forced Kellogg to recall its Austin and Keebler brands from shelves across the country, took about $70 million, or 5 cents a share, from company's bottom line.

Revenue, meanwhile, came in at $3.17 billion, down from $3.26 billion a year ago. Taking into account the effects of a stronger dollar during the just-ended period, the company said that its quarterly revenue on an internal basis grew 4% year-over-year.

Sales in the company's core cereal business rose 6% over the same period last year. Retail snacks, meanwhile, which includes peanut butter, saw its sales increase only 2%.

Looking ahead, Kellogg reaffirmed guidance for the rest of the year. Analysts are expecting second quarter and full-year EPS of 81 cents and $3.06, respectively.

Kellogg also said it plans to spend more to save more: it will increase up-front costs in order to eliminate $1 billion in expenses by the end of 2011. The up-front costs will be more than the company had originally announced, up to 22 cents a share from 14 cents.

Kellogg peer Proctor & Gamble ( PG) also reported stronger-than-expected earnings Thursday morning, despite diminished revenue and a cautious outlook for top-line growth the rest of the year.
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