General Mills (NYSE: GIS) reported Q4 EPS of $0.66, $0.06 better than the analyst estimate of $0.60. Revenue for the quarter came in at $3.93 billion versus the consensus estimate of $3.86 billion.

Update on Cost Savings and Adjusted Operating Profit Margin Targets

With strong savings in fiscal 2016, and visibility to further savings over the next two years, General Mills now expects its previously announced cost-reduction and organizational efficiency initiatives – including Projects Century, Catalyst, and Compass, as well as administrative cost reductions delivered through zero-based budgeting – to generate total annual savings of $600 million by fiscal 2018, up from the previous target of $500 million (please see Note 4 below for more information on our restructuring actions).

The company also announced it is undertaking further efforts to prioritize investments, reduce complexity, and streamline its operations to drive profitable sales growth. As a result, General Mills is increasing and accelerating its previous margin expansion target. The company now expects to achieve an adjusted operating profit margin of 20 percent by fiscal 2018, an increase of 400 basis points over fiscal 2015 levels.

Key drivers of margin expansion over the next two years will include:

• Strong levels of Holistic Margin Management productivity gains;
• Continuing savings from previously announced cost-reduction initiatives;
• Increased efficiency and prioritization of commercial investments, including trade and consumer spending;
• Continuing focus on complexity reduction through SKU optimization;
• Further supply chain optimization; and,
• Continued expansion of zero-based budgeting across the business.

Fiscal 2017 and 2018 Outlook

Overall, the company expects this focused approach will result in fiscal 2017 organic net sales growth ranging from flat to down 2 percent compared to 2016, but deliver a 6 to 8 percent increase in constant-currency total segment operating profit. Fiscal 2017 adjusted operating profit margin is expected to increase by approximately 150 basis points, with constant-currency adjusted diluted EPS growing 6 to 8 percent from the base of $2.92 earned in fiscal 2016. The company estimates a 1-2 cent headwind to fiscal 2017 adjusted diluted EPS from currency translation, though this figure does not reflect recent fluctuations in the British pound.

Looking ahead to fiscal 2018, General Mills expects modest organic net sales growth and the full benefit of its margin expansion efforts will drive adjusted operating profit margin to 20 percent, resulting in a low double-digit constant-currency increase in adjusted diluted EPS.

For earnings history and earnings-related data on General Mills (GIS) click here.