According to the news report from CNBC, Thomson Reuters reported higher than expected for Quarter 1’s revenues and earnings. The company also forecast low single-digit growth in its revenue for the rest of 2018.
Thomson Reuters announced its quarterly performance results on Friday last week, showing a revenue of $1.38 billion, which is an increase from the same time last year, when the company showed revenues of $1.33 billion. The market consensus estimate for revenues was at $1.36 billion, so the news and Information Company beat market estimates too. Adjusted earnings per share for the first quarter were at $0.28, vis-à-vis market estimates of $0.27 a share.
The company stated that it was expecting the adjusted EBITDA to be between $1.2 billion and $1.3 billion for the rest of the year.
Thomson Reuters’ legal business generated revenues of $872 million in the first quarter of this year, which is an increase of 2%, without currency. The company’s Tax & Accounting business generated revenues of $437 million, which is a 5% increase after factoring out currency. The news division of the company generated $72 million in revenues, which is a big drop of 7% from the previous year.
The company’s Financial & Risk division showed a growth in revenues to the tune of 3% to $1.58 billion. However, this unit is now going to be counted as discontinued operations. This is because the company had announced earlier in 2018 that it was selling off a majoring stake of this division to the private-equity company Blackstone.
According to this deal, the new Financial & Risk firm acquired by Blackstone will make minimum yearly payments to Reuters for the next 30 years to gain access to the information company’s news service. This means that the deal will come to almost $10 billion and the payments will be subsequently adjusted for inflation over the years.
The company also stated that post the Blackstone deal, Thomson Reuters was going to concentrate on growing its Legal, Tax & Accounting as well as Regulatory divisions. The parent company of the iconic news agency Reuters News is in competition with Bloomberg and News Corp’s Dow Jones business unit for financial services.
According to US News, the 4% increase in revenue forecast for the rest of the year was offset by the announcement of the more than doubling of the company’s costs. Thomson Reuters is expecting about $500 million to $600 million in corporate costs in 2018, since it will be investing in technology as well as “right-sizing” some of its divisions.
The share price of Thomson Reuters’ dropped after the guidance was announced.
This cost estimate doesn’t include the company’s Financial & Risk division that sells data as well as news to mainly financial customers. The comparable corporate costs for last year – which also excluded the Financial & Risk division – was $244 million.
This sudden rise in corporate costs surprised analysts on Wall Street. Huber Research Partners LLC analyst, Doug Arthur stated that they were expecting the corporate costs to be around the $50 million range, if not less. So the guidance of upwards of $500 million came as a shock to the market.
Despite the massive cost forecast, analysts are positive about the company, especially after the Financial & Risk division deal with Blackstone. The company is expected to use between $1 billion and $3 billion of the money it makes from the sale of this division to make acquisitions in its Legal and Accounting divisions. However, the company stated that it has no intention of getting into any new businesses at this time.