Sotheby's (BID) delivered a big Q1 miss in May that prompted analysts to revise their estimates significantly lower for both 2013 and 2014. It is a Zacks Rank #5 (Strong Sell) stock.With shares trading at a premium to their historical medians on both a forward P/E and a price/sales basis, investors should consider waiting to bid on this stock until its earnings momentum turns around.Sotheby's is one of the largest global auctioneers of fine art, decorative art, and jewelry. It operates under three segments: Auction, Finance, and Dealer. Through its predecessors, Sotheby's has been in the auction business since 1744 and is the oldest company listed on the New York Stock Exchange.First Quarter ResultsSotheby's delivered disappointing first quarter results on May 9. Earnings per share came in at a loss of 33 cents, well below the Zacks Consensus Estimate of -12 cents, and well below a loss of -16 cents in the same quarter last year. The first quarter has historically been slow for Sotheby's due to the seasonal nature of the art auction market.Total revenues declined -3% to $101.7 million, which also missed the Zacks Consensus Estimate of $117.0 million. This was due in large part to a decline in the auction commission margin to 15.0% from 18.1% in the same quarter last year.Estimates FallFollowing the Q1 miss, analysts revised their estimates meaningfully lower for both 2013 and 2014. This sent the stock to a Zacks Rank #5 (Strong Sell).The 2013 Zacks Consensus Estimate is now $1.83, down from $2.21 just 30 days ago. The 2014 consensus is down from $2.54 to $2.28 over the same period.Another bearish signal for Sotheby's is the Zacks Industry Rank. The 'Auction/Valuation Services' industry ranks 256 of out 265.Premium ValuationDespite the negative earnings momentum, shares of Sotheby's still trade at a premium valuation. The 12-month forward P/E ratio is 19, above its 10-year median of 18x. And its price to sales ratio of 3.4 is also above its historical multiple of 2.7.The Bottom LineGiven declining earnings estimates and premium valuation, investors may want to wait to bid on this auctioneer until its earnings momentum turns around.Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.


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