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Adobe Systems Inc. (ADBE - Analyst Report) is set to report second-quarter 2014 results on Jun 17. Last quarter, the company posted 33.3% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Adobe’s first-quarter earnings of 16 cents beat the Zacks Consensus Estimate by 4 cents due to efficient cost management. Revenues, though down sequentially, were at the higher end of management’s guidance range due to accelerated adoption of creative cloud subscription pricing model.

Margins expanded in the first quarter due to the change in sales mix, which favored higher-margin products.

For the third quarter, management expects revenues in the range of $1.0 to $1.05 billion, up 2.5% sequentially at the mid-point. Adobe expects non-GAAP earnings per share in the range of 26–32 cents, well above the Zacks Consensus Estimate of 16 cents.

Earnings Whispers?

Our proven model does not conclusively show that Adobe will 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 16 cents. Hence, the difference is 0.00%.

Zacks Rank: Adobe’s Zacks Rank #3 (Hold) 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:

Micron Technology Inc. (MU - Analyst Report), with Earnings ESP of +8.70% and a Zacks Rank #1 (Strong Buy).

SYNNEX Corp. (SNX - Snapshot Report), with Earnings ESP of +0.72% and a Zacks Rank #2(Buy).

Apollo Education Group, Inc. (APOL - Analyst Report), with Earnings ESP of +3.08% and a Zacks Rank #3.

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