Skechers USA (SKX), based in Manhattan Beach, California, makes a diverse range of footwear for men, women and children. The company reported disappointing results for the third quarter. Sales missed our estimate by $12 million. EPS beat our estimate by $0.06, but the upside was due to a tax benefit of $0.22. What's more, the company's fourth-quarter guidance came in below our previous estimates of $323 million in sales and EPS of $0.28.

Economic conditions continue to worsen, and that is pressuring consumer spending and negatively affecting Skechers' results. As a result, we are reducing our estimates for 2008 and 2009. Longer term, the company's diverse portfolio of brands, international growth opportunities, and retail store expansion should bode well for its stock price. Still, its near-term upside will be limited until macro conditions show signs of improving. We maintain our Hold rating.

SKX shares are trading at 6.7x our 2008 EPS estimate and 7.5x our 2009 EPS estimate. This is a discount to its peer group, the S&P 500, and our estimate of its long-term earnings growth rate. But after the company's soft quarterly results, weak fourth quarter guidance, and our estimate reductions, we do not view the stock as particularly cheap. Our six-month target price is $13.