Avon Products (NYSE:AVP) shares struggled this morning, even as management upped its fourth-quarter guidance. The cosmetics maker expects fourth-quarter earnings of $1.03 to $1.04 per share, up from previous guidance of $0.96 per share. Exclude a $0.05 per-share gain from a tax settlement, however, and that misses the analyst consensus of $1 per share.

The company continues to perform internationally, following through on a pretty third quarter. Avon expects sales to increase 25% in Europe, with growth from both Latin America and Asia in the mid-teens. Meanwhile, operating profit should grow at least 40% in Europe, 20% in Latin America, and more than 20% in Asia.

Growth in U.S. sales, however -- while projected to climb in the low-to-mid single digits -- will be lower than previously expected. The company blamed "unfilled demand for certain holiday non-beauty products and weaker promotions on existing products."

Overall, sales are expected to increase 13% -- the largest gain since 1994. Excluding the impact of a weak dollar, sales growth will be in the high single digits.

Back in October, Avon raised its full-year earnings target to $2.65-$2.70 per share. Avon now expects earnings to climb 22.5% year over year to $2.72 per share, which, excluding the $0.05 gain, would fall right in range. Operating cash flow is still on track to reach $650 million for the year.

Avon also reaffirmed its 2004 outlook for earnings growth of 10%-12%, with continued margin improvement.

Following the Monday morning report, Avon shares were down almost 7% to $63.43 in afternoon trading. At about 21 times 2004 earnings of $2.99-$3.05 per share, Avon carries a reasonable premium, but not much in the way of margin-of-safety.

In other words, it's not altogether surprising that the shares took such a big hit at the first sign of weakness, especially given the blemish of disappointing U.S. sales.

Visit the Avon Products discussion board -- only at Fool.com. Jeff Hwang can be reached at JHwang@fool.com.