Option Trade 
ConAgra Foods Inc (NYSE:CAG) Calls 
Monday, December 21, 2015

**OPTION TRADE: Buy the CAG Mar 2016 40.000 call (CAG160318C00040000) at approximately $2.10. Place a pre-determined sell at $4.20.

Note: No protective stop losses added -- but if you wish to do so make it $0.85.

by Ian Harvey

December 21, 2015

ConAgra Foods, Inc. (NYSE: CAG), an operator of a packaged food company, is scheduled to release its fiscal second-quarter numbers before the market opens on December 22. Analysts forecast earnings of $0.59 per share, up from down from $0.61 during the same period last year. The stock has risen 11.3% on the year.

The company has outpaced analyst estimates five of the last eight quarters, and reported earnings in-line with the estimate on three occasions. Last quarter the company posted mixed results, with earnings topping the street's estimate, but revenues falling well short of the consensus, and the stock took a 7% beating on the day of the report. Since that time, shares have been stuck in a fairly tight sideways trend, but it could break out to the upside if the company's second-quarter results impress Wall Street.

Research firm Jefferies recently initiated coverage on the stock with a "buy" rating with a $50 price target. If the company can hit the consensus, the stock should finally break out of its recent trading range.

CAG was recently trading at $40.39, down $5.10 from its 12-month high and $6.94 above its 12-month low. Technical indicators for CAG are neutral and the stock is in a tight sideways trend. The stock has recent support above $39.00 and has recent resistance below $41.50.

ConAgra Foods Inc. is aggressively pursuing the right course of action to maximize value creation for its shareholders.

The company continues to invest and achieve strong operating results on all its category leading brands - Marie Callender's, Hunt's, Ro*Tel, Reddi-wip, Slim Jim and PAM - that are well positioned with consumers and deliver strong margins. Also, ConAgra will continue to invest in brand building, A&P, renovation and innovation and expand into growing customer channels.

ConAgra remains intensely focused on driving profitable growth by capitalizing on the highest potential brands and categories in the Consumer Foods segment and growing the Lamb Weston business in Commercial Foods segment.

"Our entire organization is focused on delivering long-term top- and bottom-line improvement. Rigorous portfolio segmentation work and improving innovation capabilities should benefit our top line over time, and we are in the midst of developing aggressive cost savings plans to drive improved SG&A, trade spend efficiency, and COGS. We are confident in our ability to unlock long-term value as we execute our plans to become a leaner, more focused company."

Last month, ConAgra Foods said it plans to pursue the separation of the company into two independent public companies: one comprising its consumer portfolio of diverse brands and the other comprising its foodservice portfolio of innovative frozen potato products.

The consumer brands business will be renamed Conagra Brands Inc. and the frozen potato business will operate under the Lamb Weston name. Immediately following the transaction, which is expected to be completed in the fall of 2016, ConAgra Foods shareholders will own shares of both independent companies.

The transaction is expected to be structured as a spin-off of the Lamb Weston business, in a tax-free distribution of new publicly traded stock in Lamb Weston to the company and its shareholders.

Equities research analysts at Jefferies Group initiated coverage on shares of ConAgra Foods Inc in a report released last Tuesday. The firm set a “buy” rating and a $50.00 price target on the stock. Jefferies Group’s price target would indicate a potential upside of 26.23% from the stock’s previous close.

A number of other research firms have also issued reports on CAG. Zacks Investment Research raised ConAgra Foods from a “hold” rating to a “buy” rating and set a $47.00 target price on the stock. JPMorgan Chase & Co. decreased their price target on ConAgra Foods to $47.00 and set an “overweight” rating.

Eight analysts have rated the stock with a hold rating and four have given a buy rating to the company. The company currently has an average rating of “Hold” and an average target price of $45.80.

Harvey’s Options Volatility Indicator

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

**OPTION TRADE: Buy the CAG Mar 2016 40.000 call (CAG160318C00040000) at approximately $2.10. Place a pre-determined sell at $4.20.

Note: No protective stop losses added -- but if you wish to do so make it $0.85.

”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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