CAG Is One Of The Cheapest Stocks In The Market Ahead of Earnings Wed Morning; How I’m Playing It

Conagra (CAG), the food manufacturer, is one of the cheapest stocks in the market ahead of its 4QFY26 earnings report Wednesday morning. In fact, due its declining market cap, the stock was removed from the S&P 500 two weeks ago (Monday June 29) causing a wave of forced selling by index funds.

With the stock as cheap as it is, even a little good news could lead to a nice relief rally. I’ve had my eye on CAG ever since Peter Boockvar mentioned it on CNBC’s Fast Money more than 9 months ago. It’s cheaper now than it was then and I’m ready to act.

CAG is guiding to $1.70 EPS for FY26. In other words, it is trading for 8x trailing earnings: $14.30 / $1.70 = 8.4x. The other attractive thing about CAG is its dividend. CAG pays a 35 cent quarterly dividend amounting to an annual yield of nearly 10%. It’s very hard to find a decent stock with a 10% yield. I think the dividend is safe as long as the business stabilizes at current levels because free cash flow covers it – though the margin is getting tighter.

Here’s how I’m playing it: In addition to buying a few shares, I have a limit order to sell CAG $13.50 July17 Puts at 15 cents. That gives the buyer the right to buy shares for $13.50 at the end of the week. If CAG reports a disappointing quarter and the stock trades below $13.35, this trade will be a loser. However, as long as CAG trades above $13.35 (about 7% below its current price of $14.30), this trade will be a winner. At $13.50 CAG would be even more of a buy than it is today and I’d happily buy shares.