Kraft (KRFT) reported third-quarter earnings yesterday, and there was good news and bad news.

The good news is that third-quarter Kraft earnings showed a solid 7.3% improvement year-over-year. The bad news, though, is that same Kraft earnings announcement indicated a 4.2% dip in revenue.

But bearing in mind that the year-ago revenue total for KRFT was artificially inflated, Kraft stock shareholders should be relatively pleased.

Kraft Earnings Details

All told, the Kraft earnings total rolled up to $500 million for Q3, or 83 cents per diluted share. That’s up from $466 million, or 79 cents per share of Kraft stock a year earlier. Revenue-wise, the top line fell from $4.59 billion a year earlier to $4.39 billion for KRFT last quarter.

The revenue footnote: The Mondelez (MDLZ) spin-off was being finalized around this time of year in 2012. As a result, KRFT shipped as much product as it could during the third quarter of 2012 so it would be out of the company’s hands during the fourth quarter, when the split became official.

So last year’s Q4 revenue for KRFT slumped by about as much as it swelled in Q3 of 2012 before evening out again during the first quarter of this year. Had it not been for the split-driven sales surge in the third quarter of last year, the revenue portion of the recent Kraft earnings would have shown some sales growth.

With all the unusual fiscal impacts factored into the equation, the Kraft earnings report for Q3 was just fair, though KRFT income did top estimates of 68 cents per share.

What’s Next for KRFT

One other thing to know about Kraft is that the company has been working to cut costs. At the same time, KRFT has also been fending off adverse movements in commodity prices.

On the cost-cutting front, the spin-off from Mondelez has allowed Kraft to operate with a much leaner corporate structure, as some jobs were cut and KRFT was the beneficiary of a one-time gain thanks to changes in the organization’s post-employment benefit plan. This benefit made up 18 cents of the Q3 Kraft earnings figure of 83 cents.

Chipping away at the Kraft earnings total last quarter were losses stemming from hedges against currency and commodity price fluctuation. All told, these losses deducted 5 cents per share from the third-quarter bottom line for KRFT.

KRFT intends to continue cutting costs where possible … though the more they’re cut, the more difficult it will become to find cost-cutting opportunities in the future. Commodity price fluctuations and currency volatility, though, will be a factor in all future Kraft earnings reports, and are often unavoidable.

Kraft is also aiming to revitalize some of its brands, including Kool-Aid, Grey Poupon and Planters peanuts, with sales in even the basic food areas becoming tougher to muster. As CEO Tony Vernon added to Wednesday’s Kraft earnings announcement, “[There is] no question it’s a difficult environment for our consumers and customers.”

Kraft earnings are expected to tally 59 cents per share in the current quarter, on $4.69 billion in KRFT sales.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.