THOMSON REUTERS CORP. $30(Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 829.2 million; Market cap: $24.9 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.thomsonreuters.com) gets 58% of its revenue and 48% of its earnings by selling news and information products to professionals in the banking industry and the legal (25%, 32%), accounting (10%, 11%) and scientific research (7%, 9%) fields.
Over 85% of the company’s revenue comes from products it sells under subscriptions and contracts. That gives it predictable revenue streams and cuts its risk. As well, more of its customers are switching from printed to electronic products; that’s lowering its printing and postage costs.
Thomson Reuters recently agreed to sell its health care business, which provides data and software that helps hospitals and clinics lower their costs and cut fraud. This business supplied 6% of the company’s revenue. Thomson Reuters will get $1.25 billion when the sale closes by the end of 2012 (all amounts except share price and market cap in U.S. dollars).
Without the health care business, earnings rose 18.9% in the three months ended March 31, 2012, to $365 million, or $0.44 a share. A year earlier, it earned $307 million, or $0.37 a share. Revenue rose 3.6%, to $3.2 billion from $3.1 billion.
The company’s legal, tax and accounting products continue to sell well. That’s helping it offset slower sales to banks and other financial institutions, particularly in Europe.
Thomson Reuters is also expanding its presence in fast-growing markets like Latin America, China, Russia and India, mainly through acquisitions of local information providers. These countries supplied 7% of the company’s revenue in the latest quarter, and sales in these markets rose a combined 18%, excluding the impact of exchange rates.
The company can easily afford to keep making acquisitions. Its long-term debt of $7.2 billion is a moderate 29% of its market cap, and it holds cash of $467 million, or $0.56 a share.
Thomson Reuters’ earnings will probably rise to $2.65 a share in 2012. The stock trades at 11.3 times that estimate. The $1.28 dividend yields 4.3%.
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