Sotheby's Earnings Preview

Investors hope Sotheby's (NYSE: BID  ) will top analyst estimates once again after beating predictions by $0.26 in the previous quarter. The company will unveil its latest earnings on Monday, Oct. 31. Sothebys is an auctioneer of authenticated fine art, antiques and decorative art, jewelry, and collectibles. .

What analysts say:

• Buy, sell, or hold?: Analysts strongly back Sotheby's, with five of six rating it a buy and the remainder rating it a hold. Analysts still rate the stock a moderate buy, but they are a bit more wary about it compared to three months ago.
• Revenue Forecasts: On average, analysts predict $77 million in revenue this quarter. That would represent a rise of 5.5% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is a loss of $0.35 per share. Estimates range from a loss of $0.45 to a loss of $0.27.

What our community says:
CAPS All-Stars are solidly backing the stock with 96.5% granting it an "outperform" rating. The community at large concurs with the All-Stars with 93.6% assigning it a rating of "outperform." Fools are gung-ho about Sotheby's and haven't been shy with their opinions lately, logging 229 posts in the past 30 days. Even with a robust four out of five stars, Sotheby's' CAPS rating falls a little short of the community's upbeat outlook.

Management:
Revenue has now gone up for three straight quarters. The company's gross margin shrank by 3.9 percentage points in the last quarter. Revenue rose 17.4% while cost of sales rose 71.6% to $14.9 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters. 

Quarter	Q1	Q4	Q3	Q2
Gross Margin	87.6%	90.6%	73.3%	90.2%
Operating Margin	9.2%	48.9%	(39.9%)	49.6%
Net Margin	2.0%	30.3%	(26.5%)	30.6%

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