Oct. 29 (Bloomberg) -- Kellogg Co. reported third-quarter profit that rose more than analysts estimated after the largest U.S. cereal maker increased prices to help counter higher costs for wheat and corn.

Full-year earnings per share will be ``closer to the high end'' of a previous forecast of $2.95 to $3, the Battle Creek, Michigan-based company said today in a statement. That's in line with the $3 average analyst estimate in a Bloomberg survey. Net income jumped 12 percent and revenue climbed 9.4 percent.

Chief Executive Officer David Mackay's strategy of raising prices and increasing advertising in a slowing U.S. economy may give Kellogg's earnings a further boost as commodity prices begin to decline after soaring in the past year. Profit at the maker of Rice Krispies gained in five of the last seven quarters.

``It's pretty rare to see a company actually expanding their sales and earnings at this kind of a rate in this kind of an environment,'' Tim Ramey, an analyst at DA Davidson & Co. in Lake Oswego, Oregon, said today in a telephone interview.

``Price increases have played a big role,'' Ramey said. ``Given that commodity costs will start to abate and actually probably go the opposite direction, it's going to be a very interesting and positive operating environment for Kellogg.'' He recommends investors buy the shares.

Price Increases

Kellogg raised prices at least twice this year, the last taken in September on its frozen foods, including Eggo waffles and Morningstar Farm products. That change ``equated to a high single-digit increase'' on a percentage basis, Kris Charles, a company spokeswoman, said in an e-mail.

The recent price increases have already taken into account commodity cost pressure in 2009, Mackay, 53, said in a telephone interview today. Kellogg doesn't plan to charge more for its products, the CEO said, adding it's hard to ``truly predict what's going to happen.''

Wheat futures for December delivery rose the exchange limit today on speculation demand will improve. Futures still are down 58 percent from a record $13.495 a bushel on Feb. 27 after surging 77 percent last year. Corn increased 17 percent in 2007 after gaining 81 percent the previous year.

Kellogg fell 66 cents, or 1.3 percent, to $50.02 at 4:02 p.m. in New York Stock Exchange composite trading after rising as much as 4.4 percent earlier today. The shares have lost 4.6 percent this year, compared with General Mills Inc.'s gain of 17 percent in the same period.

Net income rose to $342 million, or 89 cents a share, in the quarter through Sept. 27 from $305 million, or 76 cents, a year earlier, the maker of Keebler cookies and Nutri-Grain bars said. Profit beat by 8 cents the average estimate of 19 analysts surveyed by Bloomberg. Revenue increased to $3.29 billion.

Regional Sales

North American sales climbed 10 percent in the quarter. Cereal sales advanced 7 percent, snacks revenue increased 10 percent and frozen foods and products sold through specialty channels jumped 11 percent, Kellogg said in the statement.

Consumers have shifted their eating patterns in the face of a recession, choosing to buy groceries and eat at home over dining out at restaurants, which has helped sales, Mackay said.

International revenue rose 9 percent, or 3 percent excluding favorable effects from currency translation, acquisitions and difference in the number of shipping days. Sales growth in the Asia Pacific region was the strongest at 10 percent, while Europe posted a 3 percent gain. Latin American purchases fell 1 percent.

Kellogg bought closely held Specialty Cereals Pty in September to expand into natural cereals in Australia.

The company has said it plans to make more acquisitions. ``Given the volatility that seems to have hit emerging markets to a greater extent than even some of the other markets around the world, there is a chance that could afford us an opportunity if the right bolt-on acquisition came up,'' Mackay said.

To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net.

Last Updated: October 29, 2008 16:14 EDT