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Topic: How To Invest

Best Canadian Stocks: After 6 years, Thomson’s financial division rises

Stock Investing

Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendations on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.

THOMSON REUTERS CORP. (Toronto symbol TRI; www.thomsonreuters.com) is seeing higher demand for its financial information products for the first time since the 2008 economic crisis. Sales at its legal and tax and accounting businesses are also improving.

In the three months ended September 30, 2014, Thomson’s overall revenue rose 1.1%, to $3.11 billion from $3.07 billion a year earlier (all amounts except share price and market cap in U.S. dollars).

The financial division’s revenue (54% of the total) fell 0.7%. But banks and other clients are buying more products than they’re cancelling, which should raise this division’s future revenue.

Revenue rose 1.3% at the legal-products division (28%), 11.5% at tax and accounting (10%) and 3.3% at intellectual property and science (8%).


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Investing in stocks: Thomson continues to trim unprofitable products and cut costs

Thomson’s earnings fell 9.1%, to $361 million from $397 million. Per-share earnings declined 6.3%, to $0.45 from $0.48, on fewer shares outstanding. However, that was mainly due to unfavourable currency exchange rates and higher income taxes.

Thomson continues to phase out unprofitable products and cut costs; its yearly expenses should fall by $300 million by the end of 2015.

As a result, its projected earnings should rise from $1.88 a share in 2014 to $2.21 in 2015. The stock trades at a reasonable 17.7 times the 2015 estimate. The $1.32 dividend yields 3.4%.

Thomson Reuters is a buy recommendation of The Successful Investor.

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