THOMSON REUTERS CORP. $38 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 815.8 million; Market cap: $31.0 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.thomsonreuters.com) gets 55% of its revenue by selling news and information to professionals in the banking industry. The remaining 45% comes from providing specialized information products to clients in the legal, accounting and scientific research fields.
Thomson earned $137 million, or $0.16 a share, in 2013 (all amounts except share price and market cap in U.S. dollars). That’s down sharply from $2.0 billion, or $2.39 a share, in 2012.
Financial institutions continue to cut their spending on information products in the wake of the 2008 credit crisis. In response, Thomson is cutting jobs and eliminating less-profitable products.
That has freed up cash for new products, such as its Eikon desktop terminals, which deliver news and financial data to traders and portfolio managers. The company has now installed over 122,000 Eikons, including 90,000 in the past year.
If you exclude unusual costs, earnings per share fell 3.2% in 2013, to $1.83 from $1.89.
Overall revenue rose 0.8%, to $12.5 billion from $12.4 billion. The main financial products division’s revenue fell 2.3%, offsetting gains from other products: legal (up 2.6%), tax and accounting (up 7.1%) and intellectual property (up 9.8%).
Weak demand from banks will probably cut Thomson’s earnings in 2014 to $1.82 a share. That’s why the stock is down 5% since the start of the year. It now trades at a somewhat high 19.2 times the 2014 estimate. However, that’s still an acceptable p/e ratio, as Thomson now gets 91% of its revenue by selling its products electronically, which cuts its printing and postage costs.
Moreover, Thomson currently gets 87% of its revenue from recurring subscriptions, which cuts its risk. And it expects its restructuring plan to cut $400 million from its annual costs by 2017.
The company also just raised its dividend by 1.5%. The new annual rate of $1.32 yields 3.8%.
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