THOMSON REUTERS CORP. $52(Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 791.8 million; Market cap: $41.2 billion; Price-to-sales ratio: 3.3; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.thomsonreuters.com) sells specialized information products in four main areas: financial (53% of 2014 revenue, 39% of earnings); legal (28%, 39%); tax (11%, 12%); and intellectual property and science (8%, 10%). (All amounts except share price and market cap in U.S. dollars.)
The Americas supplied 60% of Thomson’s 2014 revenue, followed by Europe (30%) and Asia (10%).
Many banks and financial services firms cut spending on the company’s products following the 2008 financial crisis. In response, it laid off staff and simplified its operations.
It’s also phasing out its older electronic terminals, which deliver news and financial data to traders and portfolio managers, and upgrading these users to its new Eikon platform. That makes it easier for Thomson to launch new features and cuts its maintenance and support costs.
Without unusual items, the company earned $1.5 billion in 2014, up 16.7% from $1.3 billion in 2013. It spent $1.0 billion on share buybacks in 2014, so earnings per share rose at a faster rate of 20.1%, to $1.85 from $1.54.
Revenue rose just 0.5%, to $12.6 billion from $12.5 billion. Gains from legal (up 0.8%), tax (up 10.2%) and intellectual property (up 3.0%) offset a 1.7% decline at the financial division.
Thomson now gets 87% of its revenue from subscriptions and other recurring sources. That gives the company steadier revenue streams than one-time purchases. In addition, 92% of its revenue comes from electronic products and software, which speeds up its delivery times and cuts its printing and postage costs.
As of December 31, 2014, Thomson held cash of $1.0 billion, or $1.28 a share. The company’s long-term debt of $7.6 billion is a manageable 23% of its market cap.
Thomson’s sound balance sheet will let it keep developing new products. It’s also adapting its information to mobile devices.
The company’s earnings should improve to $2.20 a share in 2015, and the stock trades at 18.8 times that estimate. That’s an acceptable p/e ratio in light of Thomson’s high market share and unique products.
The company recently raised its quarterly dividend by 1.5%, to $0.335 a share from $0.33. The new annual rate of $1.34 yields 3.2%. Thomson has now raised its payout for 22 straight years.
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