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What: Shares of auctioneer Sotheby's (NYS: BID) plunged 10% today after its quarterly results disappointed Wall Street.
So what: Sotheby's shares have been on a tear in recent months, but a big fourth-quarter whiff -- EPS of $1.04 versus the consensus of $1.25 -- suggests that things aren't as bright as Mr. Market had thought. A decline in auction revenues, coupled with sliding commission margins, is triggering fresh concerns over the company's profitability.
Now what: Looking ahead, management made it clear that it will continue to look to China as its main source of growth. "Impressively, and for the first time ever, Sotheby's consolidated sales in Asia reached $1 billion in 2011," CEO Bill Ruprecht said. "We have now reached the point where the three geographic engines driving our auction business -- the Americas, Europe, and Asia -- are contributing to our success in roughly equal proportions." Of course, with the stock still up about 20% year to date, I'd wait for more of a pullback before buying in.
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