Sotheby's Sees Q4 Adj. Profit Above View; Scraps Dividend, Expands Buyback

(RTTNews) - Auction house Sotheby's (BID) on Friday forecast a loss for the fourth quarter, citing one-time charges and a decrease in agency segment gross profit. However, the company projected adjusted earnings for the fourth quarter and fiscal 2015 above analysts' expectations.

In addition, Sotheby's board of directors decided to eliminate the company's quarterly cash dividend with immediate effect and approved a $200 million increase to the company's remaining $125 million share repurchase authorization.

For the fourth quarter of 2015, Sotheby's forecasts net loss of $10 million to $19 million, or $0.15 to $0.29 per share, as compared to net income of $74 million or $1.06 per share in the prior year.

The company estimates fourth-quarter adjusted earnings of $1.11 to $1.17 per share, compared to adjusted earnings per share of $1.12 in the same period of 2014.

On average, five analysts polled by Thomson Reuters expect the company to report earnings of $0.84 per share for the quarter. Analysts' estimates typically exclude special items.

In the quarter, the company expects to incur a non-cash charge of $63 million to $68 million, or $0.94 to $1.02 per share, due to the incremental U.S. income tax associated with pre-2014 accumulated foreign earnings.

In addition, the company recorded a pre-tax charge of $37 million or $0.35 per share associated with the voluntary separation incentive programs that were implemented in the period.

The quarter's results were also adversely impacted by lower agency segment gross profit due to a lower level of various-owner auction sales as well as income statement charges associated with the sales of property from the collection of A. Alfred Taubman.

For the year ended December 31, 2015, Sotheby's forecasts net income of $36 million to $45 million, or $0.52 to $0.65 per share, as compared to net income of $118 million or $1.68 per diluted share in the prior year.

The company projects full-year adjusted earnings per share of $1.99 to $2.05, as compared to adjusted earnings of $2.03 per share in 2014. The Street expects the company to earn $1.77 per share for the year.

In light of management's recent capital allocation analysis, Sotheby's board of directors decided to eliminate the company's $0.10 per share quarterly cash dividend, effective immediately, and allocate the capital instead to repurchase shares of common Stock.

The board approved a $200 million increase to the company's remaining $125 million share repurchase authorization, resulting in an updated total share repurchase authorization of $325 million. The company expects to begin to repurchase shares of its common stock immediately under this increased authorization.