By Martinne Geller Aug 7 (Reuters) - Packaged food company Mondelez International Inc dramatically raised its share buyback authorization and posted higher-than-expected earnings on Wednesday, weeks after being criticized by prominent activist investor Nelson Peltz. Mondelez, which makes Cadbury chocolate, Oreo cookies and Trident gum, does not currently generate as much profit as it could, and should be acquired by PepsiCo Inc, Peltz said last month at a conference that was broadcast on CNBC cable television. "If you're trying to appease an activist investor, one way is potentially through returning cash to shareholders," said Morningstar analyst Erin Lash. Mondelez shares were up nearly 2 percent in afterhours trade. Lash said the size of the buyback authorization was greater than may have been expected, but noted that the company's margins remain under pressure. "That could be tempering some of the response," she said. Mondelez said it is now authorized to buy back up to $6 billion of its stock through 2016, up from $1.2 billion previously. It expects to purchase $1 billion to $2 billion worth of stock annually. The company reported a 40 percent drop in second-quarter earnings compared with a year earlier, before the company spun off Kraft Foods. Net income was $616 million, or 34 cents per share, in the second quarter, down from $1.03 billion, or 58 cents per share, a year earlier. Excluding one-time items, including costs related to last year's spin-off of Kraft Foods Group Inc, earnings were 37 cents per share. On that basis, analysts on average were expecting 34 cents, according to Thomson Reuters I/B/E/S. The company also stood by its full-year outlook, which calls for earnings per share of $1.55 to $1.60, excluding items. Net revenue rose slightly to $8.60 billion, just below analysts' average estimate of $8.62 billion. Organic revenue, which strips out the impact of acquisitions and other items, rose 3.8 percent. That is below the company's long-term target of 5 to 7 percent growth. The company also raised its dividend by 8 percent.