Why Sotheby's Shares Were Bid 17% Higher Today

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What: Shares of auction and real estate company Sotheby's (NYSE: BID) jumped as much as 17.3% on Monday following its second-quarter earnings release, hitting its high as I'm writing at 11:50 a.m. EDT.

So what: Revenue fell 10% in the quarter to $298.7 million but net income jumped 31.7% to $88.9 million, or $1.52 per share. Revenue beat the $282 million analysts were expecting and, on an adjusted basis earnings of $1.51 per share, easily topped the $1.04 estimate.

Investors knew a decline in the art auction market was coming, so it wasn't a surprise to anyone. The welcome news was an increase in earnings during the quarter.

Now what: Beating estimates can often cause a stock to pop, even with a drop in revenue. But what investors need to think about is whether expectations for the year are now too low for the business. Analysts are expecting $1.70 per share in earnings this year, which may be easily surpassed by Sotheby's given last quarter's performance. An uptick in the art market would also likely be leveraged by the company's lower cost structure. It looks like a good year ahead for Sotheby's and today's spike may be a sign of more good things to come.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Sotheby's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.