If Kellogg (NYSE: K) had cereal appealthe last time we checked in with the maker of Pop-Tarts, Special K, and Kashi brand products, then its third-quarter results outright demand investor attention.

Sequentially, total company volume moved upward from a 0.5% year-over-year decline to a 0.7% gain. Europe in particular made a dramatic comeback following the resolution of early-2009 negotiations with the region's retailers. Furthermore, the world's largest cereal maker boosted global cereal volume, gained more than a percentage point's worth of market share, and outpaced category sales growth. Apparently, scrappy store brandsain't got nothin' on Tony the Tiger.

Flipping the menu to the financials, net sales of $3.3 billion represent a slight decrease from the year-ago period, but do show quarter-to-quarter growth. And excluding foreign currency effects and acquisitions, sales rose 3%. Earnings per share, meanwhile, notched a 6% gain to register $0.94. In currency-neutral terms, growth was double that figure, at 12%.

Kellogg's earnings performance, though solid, did fall short of key competitor General Mills ' (NYSE: GIS), which recently reportedadjusted-EPS growth of 33%. We can probably attribute some of that gap to differences in product categories: Beyond the overlap in cereal, Kellogg is highly exposed to snacks, while General Mills does a brisk business in soup and yogurt.

In addition, General Mills seems to be much farther along in its productivity initiatives, whereas Kellogg is still absorbing up-front costs related to its ongoing K-Lean efficiency plan. In the third quarter, those productivity-related costs amounted to $0.06 per share. Kellogg expects to fully realize planned efficiencies by 2011, but until then, the General might offer investors better bottom-line growth.

That's not to say that Kellogg didn't post some impressive operating performance. Management expanded gross margin by 1.2% despite annual cost inflation. And year-to-date free cash flow hit $978 million, topping last year's results.

Moreover, growing margins andvolume is more than global consumer-goods giant Unilever (NYSE: UL) was able to accomplish in its most recent quarter. Also, Kellogg's strong cereal sales were particularly impressive, given that PepsiCo 's (NYSE: PEP) Quaker brand was back in action following a plant shutdown in the 2008 third quarter.

Finally, management raised full-year currency-neutral EPS guidance from a range of 8%-10% growth to 10%-12%. And shareholders can expect the same in 2010.

Of course, investment money that goes into Kellogg and its 3% yield doesn't go toward the greater dividends offered by packaged-foods companies Kraft (NYSE: KFT), H.J. Heinz (NYSE: HNZ), and Sara Lee (NYSE: SLE). Yet the benefit of sticking with a company whose products seem to be winning the loyalty of cash-strapped consumers could be well worth the sacrifice.

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This article was originally published as Poppin' Great Performance!on Fool.com

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