Option Trade 
ConAgra Foods Inc (NYSE:CAG) Calls 
Wednesday, 6th April, 2016

**OPTION TRADE: Buy the CAG Sep 2016 45.000 call at approximately $2.50. Place a pre-determined sell at $5.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.00.

by Ian Harvey

April 06, 2016

ConAgra Foods, Inc. (NYSE: CAG), an operator of a packaged food company, is scheduled to report third-quarter fiscal 2016 results before the opening bell tomorrow, April 7th. Its notable brands include Chef Boyardee, Orville Redenbacher's and Peter Pan peanut butter.

The consensus calls for earnings of $0.58 per share, down a penny from the same period last year. Over the last four quarters, the company posted a positive average surprise of 6.25%.

ConAgra's Private Brand segment divestiture is on track. The successful spin-off of the loss-making division should support the company's revenues and margins, in our opinion. ConAgra is also introducing various cost cutting and productivity enhancement measures. These factors, in addition to favorable price mix and volume growth are expected to improve the margins in the to-be-reported quarter. Also, the company's various schemes to improve product, pricing and promotion are expected to boost third-quarter results.

The stock has been trending higher in 2016. Its shares, at around $45, are up 7.4% for the year to date and 19.7% for the past 52 weeks.

Technical indicators for CAG are bullish and the stock is in a strong upward trend.

The company’s 50 day moving average price is $43.26 and its 200 day moving average price is $41.42. ConAgra Foods Inc has a 52-week low of $35.98 and a 52-week high of $45.84. The firm’s market cap is $19.57 billion.

ConAgra has outpaced earnings estimates for the last two quarters, but in each instance revenue came in light. Wall Street looked past the revenue misses, and the stock has been trending higher with the overall market, and it is currently trading just shy of its all-time high. The stock has tried to break out to a new all-time high three times over the last year, but in each instance the stock has failed to break through the ceiling to a new high. A good earnings report could finally push shares above $45 to a new all-time high.

ConAgra Foods Inc‘s stock had its “sector perform” rating restated by equities researchers at RBC Capital in a report issued on Monday. They presently have a $48.00 price objective on the stock, up from their previous price objective of $46.00. RBC Capital’s price objective suggests a potential upside of 5.70% from the stock’s previous close.

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

• Bank of America raised shares of ConAgra Foods from a “neutral” rating to a “buy” rating and set a $46.00 price target for the company in a report on Friday, February 12th.

• Jefferies Group started coverage on ConAgra Foods in a research note on Tuesday, December 15th. They set a “buy” rating and a $50.00 target price for the company.

• Finally, TheStreet raised ConAgra Foods to a “buy” rating in a report on Wednesday, February 24th.

Seven equities research analysts have rated the stock with a hold rating and six have given a buy rating to the company. The stock has an average rating of “Hold” and an average target price of $48.00.

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 Sep 2016 45.000 call at approximately $2.50. Place a pre-determined sell at $5.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.00.

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