Kellogg Co reported a lower-than-expected quarterly profit, hurt by higher costs for ingredients and more spending on advertising, sending its shares down 1.6 percent on Wednesday.

Like most food companies, the maker of Frosted Flakes cereal and Keebler cookies has been raising prices on its cereals and snacks, but those increases have lagged higher prices for wheat, oil and other commodities.

Kellogg, the world's biggest cereal maker, slightly raised its full-year net sales target on Wednesday, as price increases are expected to help offset costs. The company stood by its earnings target.

Stifel Nicolaus analyst Christopher Growe called the outlook conservative, given Kellogg's weak performance in 2010, which was exacerbated by a large recall of its cereals.

We remain bullish on the company's growth prospects in 2011, he said in a research note, reiterating his buy rating on the shares.

Also on Wednesday, Ralcorp Holdings Inc , owner of Post cereals, received a sweetened takeover bid from ConAgra Foods Inc .

PROFIT MISSES

In the first quarter, Kellogg's net income was $366 million, or $1 per share, down from $418 million, or $1.09 per share, a year earlier.

Analysts on average were expecting $1.04 per share, according to Thomson Reuters I/B/E/S.

Net sales rose 5.1 percent $3.49 billion. Analysts expected sales of $3.4 billion.

North American retail cereal sales rose 2 percent.

Kellogg said it now expects internal net sales, excluding the impact of acquisitions, to increase 4 percent in 2011, up from a prior target of 3 percent to 4 percent. New product introductions are also expected to help sales, the company said.

Kellogg stood by its target for earnings-per-share growth in the low single-digit range. Including a 9 cent-per-share benefit from foreign exchange rates, that implies earnings of $3.42 to $3.49 per share, it said.

Kellogg shares were down about 93 cents, or 1.6 percent, at $56.52 on the New York Stock Exchange.

(Reporting by Martinne Geller and Brad Dorfman, editing by Maureen Bavdek)

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