Don't Guess? Stay Neutral

Guess? Inc. (GES - Analyst Report) reported better-than-expected results for the 4th quarter thanks to early product shipments in its European segment and a lower tax rate. Management issued guidance for the first quarter, however, was well below consensus estimates. Guess did not provide guidance for fiscal year 2010.

For the 1st quarter, Guess expects revenue of $425-$445 million and EPS of $0.26-$0.30. We are lowering our estimates accordingly. The company's revenue and profit margins will continue to be negatively affected by the weak economic environment and a stronger US dollar.

The stock is up on its 4th quarter results, but we would not chase the shares here. With GES trading at 10.7x our fiscal 2010 EPS estimate, we think it is best to stay neutral on GES shares.