Option Trade 
ConAgra Foods Inc (NYSE:CAG) Puts 
Tuesday, 27th September, 2016

** OPTION TRADE: Buy the CAG DEC 16 2016 44.000 put at approximately $2.00. Place a pre-determined sell at $4.00.

Note: No protective stop losses added -- but if you wish to do so make it $0.80.

by Ian Harvey

September 27, 2016

ConAgra Foods, Inc. (NYSE: CAG), an operator of a packaged food company, will report its fiscal first-quarter results on September 29 ahead of the opening bell. The consensus calls for earnings of $0.48 per share, up from $0.45 during the same period last year.

Conagra has been trending steadily lower over the last two months, and shareholders need to see a strong quarter for the stock to regain its footing and trend higher. The strong dollar is had a material impact on the company’s international revenue and margins. Last quarter, the company reported earnings that were in-line with the consensus, while revenue fell slightly short of estimates.

The stock is up a modest 3.5% on the year.

ConAgra Foods has a 12 month low of $37.97 and a 12 month high of $48.81. The firm’s market cap is $19.11 billion. The stock’s 50 day moving average is $45.45 and its 200 day moving average is $45.74.

Why ConAgra Foods?

ConAgra Foods Inc. has been in dangerous territory. After a couple of short-lived pullbacks to start 2016, their stock has been trading above its 200 day moving average since the middle of February. In its most recent earnings release, ConAgra Foods reported lower than expected sales numbers. This sent their stock trading lower and has been on a downward slide all summer. Currently the stock's forward price to earnings ratio is at 18.42, which is slightly ahead of the S&P 500.

Analyst Input

ConAgra Foods' stock price target was lowered to $46 from $48 at Deutsche Bank last Friday.

The firm maintained a "hold" rating on shares of the packaged food company.

"ConAgra is moving ahead with a more focused, logical strategy but we have doubts around long-term strength of the company's brands," Deutsche Bank wrote in an analyst note.

"Many questions remain as to future capital structure and we look forward to further details around the Lamb Weston spin at the October Analyst Days. We believe current valuation appropriately reflects short and long-term challenges vs. opportunity," the firm added.

Last year, ConAgra announced plans to separate into two, independent public companies. Lamb Weston will be a food service supplier of frozen potatoes.

Separately, TheStreet Ratings Team has a "Hold" rating with a score of C+ on the stock.

The primary factors that have impacted the rating are mixed. The company's strongest point has been its expanding profit margins.

But the team also finds weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow.

Also, several other equities research analysts have recently commented on the company.

• Royal Bank Of Canada reissued a “sector perform” rating and issued a $50.00 price objective (up previously from $48.00) on shares of ConAgra Foods in a research note on Monday, June 27th.

• Sanford C. Bernstein reissued a “market perform” rating and issued a $49.00 price objective on shares of ConAgra Foods in a research note on Wednesday, June 29th.

• Citigroup Inc. reissued a “neutral” rating and issued a $50.00 price objective on shares of ConAgra Foods in a research note on Thursday, June 30th.

• Finally, Jefferies Group boosted their price objective on ConAgra Foods from $55.00 to $56.00 and gave the stock a “buy” rating in a research note on Wednesday, July 27th.

Eight analysts have rated the stock with a hold rating and four have assigned a buy rating to the stock. The stock presently has a consensus rating of “Hold” and a consensus target price of $49.30.

Harvey’s Options Volatility Indicator

Conclusion

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the CAG DEC 16 2016 44.000 put at approximately $2.00. Place a pre-determined sell at $4.00.

Note: No protective stop losses added -- but if you wish to do so make it $0.80.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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