Thomson Reuters Corp. reported better-than-expected earnings on Tuesday, helping push its shares to a record high, and said it is continuing to look for acquisitions to bolster its legal and tax and accounting units, where demand is up in part because of U.S. tax reforms.
Shares in the news and information provider rose 5 per cent in early trading to $73.24, marking a record high. They have benefited from the company buying back $10-billion worth of shares since August.
Thomson Reuters reported fourth-quarter revenue of $1.52-billion, compared with $1.41-billion a year ago. Earnings excluding special items were 20 cents a share, down from 22 cents a share a year ago, but significantly above the average analyst forecast of 6 cents a share according to IBES data from Refinitiv.
Thomson Reuters sold a 55-per-cent stake in its financial and risk (F&R) unit to private-equity firm Blackstone Group LP last October in a deal that valued the unit, now a stand-alone business called Refinitiv, at about $20-billion.
The company has set aside $2-billion of the $17-billion proceeds from the Blackstone deal to make purchases to help develop its legal, tax and accounting and corporates businesses.
“We have a number of potential targets,” chief executive Jim Smith told analysts on a conference call. “We’re in the process of prioritizing those targets and, in some cases, beginning some discussions, but we’re not on the verge of pulling the trigger on something big right now.”
Mr. Smith told Reuters News in an interview that market valuations were “challenging.”
“We have to make certain we find not only the right strategic fit, but the fit that makes financial sense as well. It’s a pretty frothy [mergers and acquisitions] market at the moment,” he said.
Mr. Smith said U.S. tax reforms were helping to stimulate demand for the company’s tax and accounting products.
“Rapid regulatory change is good for our business,” he said.
legal, corporates and tax and accounting are the company’s three biggest units following the F&R deal.
Excluding exchange rates, legal revenue rose 4 per cent during the quarter to $599-million. Tax and accounting sales rose by 8 per cent to $248-million. Sales to corporate clients rose by 7 per cent to $315-million.
“We were encouraged by sales growth during the quarter,” Edward Jones analyst Brittany Weissman said. “There are still many moving pieces in the results following the sale of the F&R business, but Thomson Reuters is seeing early signs of success in accelerating sales growth and improving profitability.”
Earnings were better than expected owing to a lower tax rate and the share buyback, Ms. Weissman said.
For 2019, the company forecast adjusted earnings of $1.4-billion to $1.5-billion, up from $1.4-billion in the current year.
The company has retained a 45-per-cent stake in Refinitiv, which sells data and news primarily to financial customers. Under the agreement with Blackstone, Refinitiv will make minimum annual payments of $325-million to Reuters over 30 years, adjusted for inflation, to secure access to its news service, equal to almost $10-billion in all.
Refinitiv revenue grew by 3 per cent, excluding currency movements, to $1.55-billion during the quarter, Thomson Reuters said.
Thomson Reuters, controlled by Canada’s Thomson family, is the parent of Reuters News. Revenue from Reuters News more than doubled to $155-million, reflecting a first-time contribution from the Refinitiv deal. Mr. Smith told analysts on a conference he expects the division to be a stronger contributor to the overall profitability going forward.
For 2018 as a whole, Thomson Reuters reported overall revenue growth of 4 per cent. Revenues excluding the effect of the Blackstone deal rose by 2.5 per cent.
For 2019, the company is forecasting organic revenue growth of 3 per cent to 3.5 per cent. For 2020, it expects revenue growth of 3.5 per cent to 4.5 per cent, in line with December guidance.