How hot has the art world been? Sotheby’s Inc. (BID) just had the best quarter in the company’s 267-year history. This Zacks #2 Rank (buy) has the powerful combination of both growth and value as it trades with a PEG ratio of just 0.6.
Sotheby’s is the auction house that specializes in art auction, private sales and art-related financing activities. It operates about 250 auctions a year in 40 countries and has salesrooms in New York, London, Hong Kong and Paris.
Founded in 1744, the company is the oldest publicly traded company on the New York Stock Exchange.
Record Results in the Second Quarter
On Aug 3, Sotheby’s reported record second quarter results as it easily surprised on the Zacks Consensus Estimate by 17%. Earnings per share were $1.83 compared to the consensus of $1.57.
Net income was a record $127.2 million or 48% higher than a year ago. This was mainly due to significantly higher auction and private sale commission revenue which was partially offset by a decline in auction commission margins to 16.4% from 18.7% in the second quarter of 2010.
Competitive pressures resulted in the lower commission margins.
For the first half of 2011, consolidated sales jump 44% to a record $3.4 billion.
Who’s doing all the buying and selling? The Chinese.
However, private sales shot up 114% in the first half and there were also increases in auction sales at all of its 4 principal selling centers around the world.
More of the Same in the Second Half of 2011?
Sotheby’s is bullish about the near term future. Who can blame them after what they’ve seen in the first 6 months?
“An exciting fall season is already taking shape and our clients around the world can expect a number of wonderful sales and objects at Sotheby’s this autumn,” said Bill Ruprecht, President and CEO.
Growth And Value
The analysts are just as bullish about 2011 as the Zacks Consensus Estimate has jumped to $3.06 from $2.81 per share in the last 60 days.
This is earnings growth of 30.6%.
Shares have been on a 3-year tear but have recently pulled back in the stock market sell off.
The sell off makes the company even more attractively priced. Sotheby’s has a forward P/E of just 11.9 which is well under the 15x I use for value stocks.
It also has a price-to-book ratio of 2.6. A P/B ratio under 3.0 usually indicates value.
With double digit earnings growth and a P/E under 15, and plenty of customers eager to buy the latest $10 million painting, Sotheby’s is an attractive play on the global recovery.
This Week’s Value Zacks Rank Buy Stocks
The death of the department store has been greatly exaggerated. Dillard’s Inc. (DDS) recently surprised on the Zacks Consensus Estimate by 58%. This Zacks #1 Rank (strong buy) is a value stock with a forward P/E of just 11.8. Read the full article.
Wyndham Worldwide Corporation (WYN) continues to bank on growth in the travel industry. This Zacks #1 Rank (strong buy) is expected to see double digit earnings growth in 2011 yet it trades at just 12.9x forward estimates. That gives it the magical combination of being both a value and a growth stock. Read the full article.
Health insurer stocks have been on quite the run since 2009. Yet Humana Inc. (HUM) is still trading at just 9.6x forward estimates. This Zacks #1 Rank (strong buy) recently raised full year guidance after a better-than-expected second quarter. Read the full article.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
