Bank Of America: Time Is Right To Buy TreeHouse Foods - Conagra Brands (NYSE:CAG), Treehouse Foods (NYSE:THS)

TreeHouse Foods Inc. THS is down 7.1 percent this year, though prices are 14 percent above their 52-week lows.

Bank of America Merrill Lynch's Evan Morris upgraded TreeHouse Foods to a Buy from a Neutral, with an $88 price objective.

Morris said that TreeHouse is likely to end its three consecutive quarter streak of significant downward revisions when it reports earnings, making the stock a good risk/reward proposition at these levels.

Bank of America Merrill's Evan Morris said that TreeHouse Foods has good upside potential at current levels. Morris pointed to two factors that drive his assumption.

Revised Earnings

First, over the past three quarters, TreeHouse significantly revised its earnings downward. That pattern is about to come to an end, Morris said.

"We do not believe there will be a need for another significant guide down," Morris argued, despite the fact that the "operating environment in the food and beverage industry remains difficult."

Flirting With Private Label Business?

Second, Morris suggested that TreeHouse might be a natural suitor for ConAgra Foods Inc CAG's private label business. In August, the New York Post reported that the company was considering acquiring the business for $3 billion.

If TreeHouse were to close that deal, Morris suggested that it would "provide upside risk to our new $88 price objective." That upside would be the result of the fact that TreeHouse's ability to "fix or improve" the business.

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