Skip to main content

NEW YORK (TheStreet) -- Shares of Sotheby's  (BID) - Get Free Report are up 5.31% to $42.81 after the art auctioneer released preliminary, unaudited financial results for the first quarter.

Sotheby's said it expects to report that net auction sales increased by 40% from the prior year to approximately $730 million.

It noted that the improvement is primarily due to a $113 million, or 34%, increase in sales of Impressionist Art and Contemporary Art over last year.

Must Read: Warren Buffett's 10 Favorite Growth Stocks

SELL NOW: If you own any of the 900 stocks that TheStreet Quant Ratings has identified as a 'Sell' could potentially lose EVERYTHING in the next 6-12 months. Learn more

The company said it expects to report that pre-tax loss for the first quarter improved by 81% to approximately -$6 million, as compared to Sotheby's pre-tax loss of -$32 million in the first quarter of 2013.

The unusual move, Bloomberg reports, came before its annual shareholder meeting on May 6 in New York as Sotheby's is being challenged by activist investor Daniel Loeb over its leadership, and is looking to fend off the hedge-fund manager.

TheStreet Ratings team rates SOTHEBY'S as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate SOTHEBY'S (BID) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, expanding profit margins, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.2%. Since the same quarter one year prior, revenues rose by 16.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SOTHEBY'S has improved earnings per share by 35.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SOTHEBY'S increased its bottom line by earning $1.86 versus $1.56 in the prior year. This year, the market expects an improvement in earnings ($2.30 versus $1.86).
  • The gross profit margin for SOTHEBY'S is rather high; currently it is at 60.40%. Regardless of BID's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BID's net profit margin of 26.75% significantly outperformed against the industry.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Despite currently having a low debt-to-equity ratio of 0.46, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that BID's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.53 is high and demonstrates strong liquidity.
  • You can view the full analysis from the report here: BID Ratings Report

STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months.Learn more.