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Want to play the hot art market through stocks? Sotheby's is right in the middle of it. This Zacks Rank #1 (Strong Buy) is expected to post double digit earnings growth both in 2013 and 2014.
Sothebys is the auction house that specializes in art auction, private sales and art-related financing activities. It operates in 40 countries and has 8 salesrooms including in New York, London, Hong Kong and Paris.
In business since 1744, it is also the oldest listed company on the New York Stock Exchange.
Biggest Auction in Its History
Contemporary art is hotter than even the old masters. Recently, Sotheby's held the largest auction in its history.
Andy Warhol's "Silver Car Crash (Double Disaster)", which was in private hands, was estimated with a pre-sale price in excess of $60 million. It ended up selling for a record for a Warhol at $105 million.
This is coming on the heels of Christie's record setting art auction, which saw Francis Bacon's "Three Studies of a Lucien Freud" sell for $142.4 million, a record for a single artwork.
But it's not just limited to art. Sotheby's also auctioned "The Pink Star", a 59.6 carat pink diamond, at a gem auction in Geneva. It had a pre-sale estimate of $60 million and sold for $83 million, a record for a gemstone at auction.
Beat in the Third Quarter
On Nov 11, Sotheby's reported its third quarter results and beat the Zacks Consensus Estimate by a penny. The third quarter is historically a slow quarter, representing just 7% to 10% of annual auction sales. It usually results in a loss for the company.
Still, there was revenue growth in the quarter as private sale commissions rose 77% and auction commission revenue jumped 16%.
But fourth quarter has already seen a pick-up, with the Warhol and the gemstone sale. Its Hong Kong sales series brought in a record $538 million, which was 105% above the year ago period.
Full Year Estimates Rise
The analysts like what they see. 1 estimate was raised for both 2013 and 2014 since the earnings announcement.
2013 is expected to see 12.6% earnings growth. 2014 looks even more bullish with another 19.7% EPS growth.
Several activist fund managers, including Dan Loeb at Third Point, have taken positions in the company so interest in the shares has jumped.
Shares have soared to a 2-year high.
It's not a cheap stock, with a forward P/E of 26.8. Investors are buying the double digit growth.
If you're looking for a way to cash in on the red hot art market, without buying a painting yourself, then Sotheby's is a stock you should keep an eye on.
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