Kraft Foods Inc (KFT: 25.7414, 1.4914, 6.15%) posted a higher-than-expected first-quarter profit helped by price increases and cost-cutting measures.

The largest North American food company on Tuesday also stood by its 2009 earnings and revenue forecasts.

In recent years, Kraft has cut production costs while also increasing advertising and product development to help it garner higher prices and fend off competition from lower-priced private-label competitors.

The maker of Oreo cookies, Maxwell House coffee and a host of other well-known products said profit was $662 million, or 45 cents a share, compared with $601 million, or 39 cents a share, a year earlier.

Analysts on average forecast 40 cents a share, according to Reuters Estimates.

Sales fell 6.5% to $9.40 billion, hurt by the impact of the stronger dollar, which lessens the dollar-value of sales made overseas. A shift in the Easter holiday to April from March this year also cut into first-quarter sales.

“Organic revenue,” a measure of sales that excludes currency fluctuations, acquisitions and divestitures, rose 2.3%.”

Kraft, like most food companies, has raised prices the last few years to offset higher commodity costs. But those price increases have pressured volume as some consumers turn lower-priced options.

For the year, Kraft stood by its forecast calling for earnings per share of $1.88 and organic revenue growth of about 3%.

Kraft shares were at $25.06 in premarket trading, up 3.3 percent from Monday’s New York Stock Exchange close of $24.26.

Roche Holding AG is in “close contact” with governments worldwide and can boost production of its Tamiflu influenza treatment if a swine-flu pandemic develops, Chief Executive Officer Severin Schwan said.

“We are ready to deliver emergency stocks to the World Health Organization,” Schwan said during a press conference in Paris today. “We can intensify production of Tamiflu.”

As many as 152 people died in Mexico from swine flu-related causes, and the virus is confirmed in the U.S., U.K., Canada, New Zealand and Spain. The WHO has raised its global pandemic alert level, indicating the disease is no longer containable. A pandemic is an unexpected outbreak of a new contagious disease that spreads from person to person across borders.

Roche, based in Basel, Switzerland, can make as many as 400 million doses of Tamiflu a year but lifting production to its maximum “takes some time,” Schwan said. Governments worldwide already have about 220 million doses in stock, he said.

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“We are much better prepared today compared to the situation which occurred a couple years ago with the avian flu,” Schwan said.

France has 23 million Tamiflu doses in stock, said Sophie Kornowski-Bonnet, who heads Roche’s French pharmaceutical unit.

It’s “too early” to say whether governments will be placing more Tamiflu orders in the days to come, Schwan said.

The WHO confirmed that Tamiflu “is active” against swine flu, Schwan said. Roche, the world’s biggest maker of cancer drugs, has no shortage of Tamiflu stocks for now, he said.

The company has 3 million Tamiflu doses as part of an emergency stock for the WHO that can be sent immediately, Schwan said. Half of those doses are in Switzerland and half are in the U.S., making it quicker to send them, he said. The WHO already has a stock if its own of 2 million Tamiflu doses, Schwan added.

Roche doesn’t plan to increase the price of Tamiflu, Schwan also said.

Ford shares rally on Goldman Sachs upgrade to buy

Analysts says bankruptcies from GM, Chrysler likely in coming weeks

Ford Motor Co. shares jumped as much as 14% Wednesday after Goldman Sachs told investors that now is the time to buy ahead of an industry “sea change” that will benefit the nation’s second-biggest automobile maker.

Ford Motor Co. shares jumped as much as 14% Wednesday after Goldman Sachs told investors that now is the time to buy ahead of an industry “sea change” that will benefit the nation’s second-biggest automobile maker.

He also targeted an earnings improvement of more than $11 billion for GM over the same time frame. But, while GM has “significant operating upside,” he cautioned that its common shares will probably be terminated through bankruptcy. GM has until the end of next month to justify further funding from the Obama administration.

GM shares followed Ford’s higher, trading up 7% to $1.82.

Chrysler has until the end of April to ink a deal with Fiat that would keep the privately held company from being forced into bankruptcy.

Despite the well-chronicled trouble facing the industry, Archambault raised his sales target for 2009 to 11 million cars and trucks from a prior target of 10 million, citing the likely impact of a scrappage plan. He also upgraded the sector to neutral from cautious.

The slippage parallels that of sales of the original iPhone in AT&T’s second quarter of 2008, when the company reported “reduced iPhone sales ahead of the early July iPhone 3G launch.”

After the iPhone 3G was released on July 11, 2008, however, AT&T crowed that “In the first 12 days following launch, sales of the iPhone 3G were nearly double levels achieved in AT&T’s 2007 iPhone launch.”

The telecom giant can only hope that they’ll experience the same surge when the new iPhone – or iPhones – appear as early as this June.

AT&T has benefited mightily from the iPhone. The company’s last three earnings reports have reported that about 40 per cent of iPhones were sold to customers new to AT&T. With the company’s landline business slipping, those new wireless subscribers provide a welcome cash infusion.

AT&T apparently sees iPhone sales as key to future profitability, seeing as how the company is reportedly dickering with Apple to extend its exclusive deal until 2011.

Exactly what will lure current iPhone owners to upgrade to a new model – and perhaps pass their current phone down to their kids – remains unclear. Apple, as usual, isn’t saying.

But a review of recent Apple patent filings reveals such possible goodies as a self-resizing interface, video mail, biometric security, and more. Of course, merely filing a patent doesn’t mean that a product based on it will ever appear – Apple, for example, filed a tablet-Mac patent way back in 2005.

Rumors about the new iPhone have also come hot and heavy, including a 3.2 megapixel camera, video editing, hotter processors, and the oft-discussed iPhone nano.

Whatever Apple has up its sleeve, one thing is certain: AT&T is looking forward to it helping to fatten their bottom line. ®

Airline stocks split directions Tuesday as two carriers posted better-than-expected first-quarter results, and a JPMorgan analyst downgraded three airlines and upgraded another.

AirTran Holdings ( AAI – news – people ) Inc., parent of discount carrier AirTran Airways, led the group’s gainers after it posted a first-quarter profit of $28.7 million despite a 9 percent drop in revenue. The results topped Wall Street expectations.

Shares shot up $1.37, or 24.6 percent, to $6.95 in afternoon trading.

Also reporting earnings was Continental Airlines Inc. ( CAL – news – people ), which lost $136 million, or $1.10 per share in the first quarter as traffic fell and business travelers saved money by moving from first class to the coach cabin. However, the loss was narrower than Wall Street expected.

In a note to clients, JPMorgan analyst Jaime Baker cut Continental and United Airlines parent UAL Corp. ( UAUA – news – people ) to “Neutral” from “Overweight.” He also reduced his rating on U.S. Airways Group Inc. ( LCC – news – people ) to “Underweight” from “Overweight.”

Baker noted that while the stocks have recovered somewhat in the last month, he’s concerned that demand won’t be strong enough for the threesome to meet Wall Street’s expectations over the next several quarters.

Revenue per available seat mile – a key performance measure among airlines – is expected to suffer next month, which Baker believes could spur forecast cuts and leave the three major carriers “vulnerable.”

Baker set his 2009 forecasts significantly below the consensus estimates – $7 below for UAL and $4 below for Continental and U.S. Airways.

“We’re not certain all investors are prepared for potential losses of this magnitude,” he said.

In positive news, Baker raised his rating on Southwest Airlines Co. ( LUV – news – people ) to “Neutral” from “Underweight,” citing a lag in the stock price since this summer.

In afternoon trading, Continental lost $1.10, or 7.3 percent, to $13.90. UAL fell 35 cents, or 5.3 percent, to $6.28. U.S. Airways jumped 30 cents, or 7.2 percent, to $4.48.

Southwest gained 2 cents to $7.55.

The restaurant chain beats first-quarter earnings estimates as price-conscious diners shop for values

It’s not a big surprise that McDonald’s (MCD) first-quarter earnings beat Street estimates on Apr. 22. The fast-food chain is expected to thrive in a recessionary economy where diners are looking to cut costs. But surprisingly, the gains aren’t necessarily coming from the cheapest items on its menu—the $1 specials. More important, says CEO James A. Skinner, McDonald’s is doing a good job stealing business from higher-priced competitors such as Starbucks (SBUX) and selling those customers higher-margin items, such as espresso-based coffees and Snack Wraps, that are seen as comparative bargains.

“We are not the winners in the current environment because everybody has decided to trade down,” Skinner said in a recent interview with BusinessWeek. “That is not the case.”

For the quarter ended Mar. 31, McDonald’s reported income of $979.5 million, or 87¢ a share, compared with $946.1 million, or 81¢ a year earlier. Analysts had estimated earnings at 82¢ a share. Revenues declined 4% year over year, to $5 billion. The results included a 4¢-per-share gain in the sale of the company’s minority interest in the Redbox DVD rental machine business and an 8¢-a-share negative impact of foreign currency translation. Worldwide sales at restaurants open at least 13 months were up 4.3%. In the U.S., same-store sales rose 4.7%

Sales were slightly weaker in China than expected. But McDonald’s sees China as one of its brightest prospects, along with Germany, Japan, Russia, and the U.S.

Hearty Breakfast Sales

McDonald’s has been on a tear since spring 2003. Same-store sales have gone up every month since then, with only two lapses. One key driver: The Oak Brook (Ill.) chain is doing much better at breakfast, a “day part” when burger competitors Wendy’s (WEN) and Burger King (BKC) are nonentities, and Starbucks is tumbling because it’s perceived as a too-expensive luxury. To grab even more of the morning market from Starbucks, McDonald’s is adding McCafé coffee bars to all 13,900 U.S. locations; the rollout should be complete by midyear.

McDonald’s is also gaining because while people worldwide are trading down, they’re not necessarily eating away from home so much less. According to market trackers NPD, on average Americans will eat out 204 times in 2009, only three fewer meals than last year, based on current trends. “This recession has not caused us to want to cook more,” says NPD’s Harry Balzer. But people are moving toward cheaper meals, and McDonald’s long-standing reputation for value helps a lot here. Indeed, the $1 menu brings in lots of traffic, and always has, even during good times.

But Skinner points out that the $1 menu isn’t the only reason McDonald’s is succeeding. The CEO notes that the $1 menu has steadily accounted for 13% to 15% of sales since 2003′s turnaround. Surprisingly, given the recession, its share has dropped to about 10%. The reason, Skinner says, is that McDonald’s has lots of other items that don’t cost much more—that are seen as bargains. Its Snack Wraps, at $1.29 to $1.49, are selling strongly, as are breakfast sandwiches.

Another example is in its basic burger. McDonald’s recently dropped the Double Cheeseburger from the $1 menu. Cheese prices had climbed so much in 2008 that the sandwich had turned into a money loser at many outlets. McDonald’s replaced it with the McDouble, which has two patties of burger, but only one slice of cheese. The Double Cheeseburger now sells for $1.19 to $1.39 depending on location, but even with that price hike, it’s outselling the $1 alternative by a 60-40 ratio.

The global recession continued to take a toll on the drug maker Merck’s (MRK: 23.7275, -1.5425, -6.1%) business in the first months of 2009, as the company saw sales of its most popular and lucrative cholesterol and cancer drugs evaporate during the quarter.

The Whitehouse Station, N.J.-based company said it earned $1.45 billion last quarter, or 67 cents a share, down 56% from $3.33 billion, or $1.52 a share, from a year ago.

On an adjusted basis, Merck said it earned 74 cents a share during the first quarter; three cents shy of the 77 cents expected by analysts, according to Thomson Reuters. The adjusted earnings included a 7-cent charge related to its merger and related costs with Schering-Plough (SGP: 22.16, -0.88, -3.82%).

Merck’s total sales during the quarter fell by 8% to $5.4 billion, well short of the $5.76 billion expected by analysts.

In a statement, Merck’s President, Chairman and Chief Executive Richard Clark said last quarter’s results “reflect the impact of the difficult global economy on patients, providers, and payers.”

Shares of Merck were down 7% on Tuesday, and are down more than 21% year to ate.

The drug company’s weakness could be seen in the company’s most prominent drugs. Sales of the popular Zetia and Vytorian cholesterol medications dropped by 23% during the quarter to $945 million compared to a year ago.

Merck’s cervical cancer vaccine, commonly known as Gardasil, saw sales fall by 33% compared to last year, to $262 million. The popular asthma drug Singulair saw sales drop 4% to $1.1 billion.

One drug that did do well during the quarter was Merck’s diabetes drug Januvia, which saw sales rise 51% from a year ago to $411 million.

The drop in sales for both of those drugs could be an indication of American consumers, who often lost their health insurance or are cutting back on discretionary purchases, stopped using the high profit margin, brand name drugs that Merck offers and switched to generics. Merck said it expects flat sales for Gardasil for 2009.

There was also disappointing news out of Merck’s already troubled drug development pipeline. Merck said it would be withdrawing its application for Food and Drug Administration approval for its experiment migraine drug MK-0974, citing an increase in liver disease among patients.

Despite the disappointing news in its pipeline and the decrease in sales, Merck reiterated its full-year forecast of $3.15 to $3.30 a share. The company did reduce its revenue forecast to $23.2 billion from $23.5 billion, saying it would make up the cut in revenue through cost cuttin