Why Sotheby's (BID) Stock Is Higher In After-Market Trading

NEW YORK (TheStreet) -- Shares of Sotheby's (BID) are up 4.76% to $43.53 in after-market-trade following the release of its first quarter 2014 earnings. 

The auctioneer showed a $211 million, or 40%, increase in net auction sales and a resulting $26.1 million, or 33%, increase in auction commission revenues.

As a result, the company reported a loss before taxes of  -$5.7 million, representing a $26 million improvement compared to the prior year.

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For the first quarter, consolidated sales increased 32% to $1 billion.

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 a number of strengths, 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, solid stock price performance 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 2.0%. 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.
  • Powered by its strong earnings growth of 35.41% and other important driving factors, this stock has surged by 25.52% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • 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
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