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Applied Materials, Inc. (AMAT - Analyst Report) is set to report second-quarter 2014 results on May 15. Last quarter, the company posted a 4.6% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

The company’s first-quarter earnings exceeded the Zacks Consensus Estimate by a penny. Revenues of $2.19 billion were up 10.2% sequentially and 20.8% year over year, benefiting from the proliferation of mobile devices.

The first quarter was strong for Applied Materials in terms of margin growth, driven by improving mix of higher-value products in semiconductor and display, as well as material cost efficiencies.

For the second quarter, Applied Materials expects revenues to be up 3–10% with the non-GAAP earning per share coming in within 25–29 cents a share.

Earnings Whispers?

Our proven model does not conclusively show that Applied Materialswill beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 28 cents. Hence, the difference is 0.00%.

Zacks Rank: AMAT has a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

You could consider other stocks with a positive earnings ESP and a Zacks Rank #1, 2 or 3 such as:

Sanderson Farms, Inc. (SAFM - Snapshot Report), with Earnings ESP of +3.75% and a Zacks Rank #1 (Strong Buy).

Encana Corporation (ECA - Analyst Report), with Earnings ESP of +9.43% and a Zacks Rank #1.

RSP Permian, Inc. (RSPP - Snapshot Report), with Earnings ESP of +11.11% and a Zacks Rank #1.

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