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News and data provider Thomson Reuters Corp. (TRI-T) raised its full-year revenue forecast after third-quarter revenue in its Markets division, which serves banks and other financial institutions, rose for the first time in nearly two years.
The results suggest the company's customers, which also include legal and healthcare professionals, are recovering from the recession that caused widespread cost cuts and layoffs.
Thomson Reuters said Thursday it expected 2010 revenue to be flat to slightly up, rather than flat to slightly down as it had previously forecast. It continues to expect net sales to be positive for both of its main divisions this year.
"What's surprising is where the (revenue) beats have come from," said Citi analyst Thomas Singlehurst, singling out the rise in revenue in the Professional division as "impressive."
Underlying operating profit fell 4 percent to $681 million US, mainly due to investment in new products, causing the operating profit margin to slip slightly to 21 percent.
Thomson Reuters has invested $1 billion in initiatives including online financial video news service Reuters Insider and Eikon, a desktop trading terminal that it sells to financial professionals.
"People who understand how our subscription model works will figure out that positive net sales this far into the year will imply revenue growth next year other than in the most extraordinary circumstances," Chief Executive Thomas Glocer said in an interview.
Adjusted earnings per share rose to 49 cents from 43 cents a year earlier because of lower integration costs related to Thomson Corp's purchase of Reuters Group Plc in 2008.
Analysts, on average, were expecting earnings of 44 cents per share, according to Thomson Reuters.
Thomson Reuters said revenue from ongoing businesses was $3.256 billion in the quarter, up 3 percent from a year earlier, excluding currency adjustments.
Analysts, on average, were expecting $3.198 billion, according to Thomson Reuters.
In the Markets division, which competes with companies such as Bloomberg LP and News Corp's Dow Jones unit, revenue rose 1 percent to $1.85 billion.
Like Bloomberg, Thomson Reuters gets much of its revenue from long-term subscriptions. The Markets division's sales and trading unit reported flat revenue compared with last year, while revenue in the news agency business fell 3 percent as some customers canceled.
The company has signed contracts for more than 1,000 Eikon desktops, Glocer said.
Revenue in the enterprise division, which provides data for risk management to financial companies, rose 10 percent.
Revenue rose 5 percent in the Professional division, which includes the WestlawNext database for lawyers and other products for accountants, scientists and healthcare workers.
Citi's Singlehurst had expected Professional division revenue to rise 2 percent.
The company said it has sold WestlawNext to more than 9,000 customers since it debuted the product in February 2010, well ahead of the company's expectations.
Some of Thomson Reuters' competitors have also reported upbeat forecasts in recent days.
Pearson Plc raised its full-year forecast Monday, saying subscriptions had risen at the Financial Times newspaper.
British financial information group Euromoney said it expects a record pretax profit this year as subscription revenue growth accelerates.
Another competitor, Dutch-based Wolters Kluwer, will report quarterly results on Nov. 3. Traders said this month that Wolters might try to buy Anglo-Dutch publisher Reed Elsevier.