Maybe I should get my own 1-900 line and start telling fortunes.

Yesterday, a colleague of mine described how precarious he figured the stock price was for American Eagle Outfitters (NASDAQ:AEOS). "If they don't live up to expectations, the stock's going to get crushed."

I looked across the cubes at another colleague who, like me, happens to own shares, and said, "No way they're going to miss. In fact, I bet they beat their guidance by a penny."

And so it is today.

With analysts led by the nose to an average estimate of $0.65 per share, American Eagle posted $0.66 per share, a 44% increase over the prior-year period. Revenues were up 20% on same-store sales growth of 13%, and the $696 million on the top line easily skipped past analysts' estimates for $691 million.

I find it pretty tough to believe that management didn't know this would be the number, having issued guidance with a top end of $0.65 per share mere weeks ago. I really hope management isn't playing the numbers game here, but it sure looks like it to me. And Mr. Market, true to form, is applauding today, pushing the shares up another couple percentage points toward yet another 52-week high.

On the other hand, sandbagging or not, it's tough to argue the reaction isn't deserved. That kind of revenue performance, leveraged over the store base, led to major gains in margins over the prior-year quarter, beginning with a 2.8-percentage-point gain in gross margins, to a improvement of 1.9 percentage points in net margin. That's pretty impressive, given that SG&A expenses rose 60 basis points as a result of expensing of stock options and the launch of Martin + Osa.

American Eagle's margins are now among the best in this breed, whizzing past slow faders like Gap (NYSE:GPS) and fast faders like Pacific Sunwear (NASDAQ:PSUN) and matching up with the mark at Abercrombie & Fitch (NYSE:ANF). Can they get to the level of retail margin kingpin Chico's FAS (NYSE:CHS)? I wouldn't count on it, but it's nice to dream.

American Eagle is clearly firing on all cylinders, but with shares trading just below what I consider fair value, I'd have trouble recommending that investors jump in with both feet now. While I'm pretty sure the company will outpace the S&P for the next few years, Mr. Market is fickle. A bit of a sales miss, the realization that Martin + Osa is going to eat away at margins for a while . it wouldn't take much to send shares down in a hurry. Keeping some powder dry for that eventuality might be the smartest play to make.

American Eagle Outfitters, Gap, and Pacific Sunwear are Motley Fool Stock Advisor recommendations. A free guest pass will get you the reasoning behind the recs, as well as access to all past picks and a dynamic user community.

At the time of publication, Seth Jayson held shares of American Eagle but no positions in any other company mentioned. View his stock holdings and Fool profile here. Gap is a Motley Fool Inside Value recommendation, too. Fool rules are here.