Sotheby’s: Zacks’ Bear of the Day Play

There is a reason that esteemed fine arts auction house Sotheby’s Holdings (BIDFree Report) shares have gone sideways for five years, still stuck under $40 like they were in 2012.

That reason is earnings, or the lack of earnings growth I should say. Thus the stock has spent considerable time in and out of the Zacks #5 Rank cellar as earnings estimates start out the year overly-optimistic, only to be brought back down to earth.

And this is probably the third time I have chosen to write about BID as the Bear of the Day.

The most recent analyst estimate revisions that hit Sotheby’s followed their big Q3 earnings miss earlier this month. Analysts quickly took down this year’s full-year consensus 30% from $2.24 to $1.57, representing -24% EPS growth.

This disappointment followed a surprisingly good Q2 when the company reported a 45% EPS beat in August. Clearly, the lumpiness in the business continues to haunt long-term investors, like activist Dan Loeb of Third Point Capital.

To help you visualize the year-after-year pattern of earnings estimates for this company, we can do no better than the Zacks proprietary Price & Consensus chart which plots the stock price against full-year EPS estimates as they evolve over time…

As you can see, estimates typically start out with high visions of growth. This is not unusual for most companies. It’s how the analysts on Wall Street tend to do their work.

What makes BID a standout thought is how the estimates haven’t gotten any traction in the past 5 years. This year and last’s EPS come in well under the $2 earned in 2013.

Until the earnings picture turns around for BID, put your paddle down. The Zacks Rank will let you know when a quarterly portrait worth your time and money is on the block.

So Where Are the Profitable Trades?

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