Report
Colin Plunkett
EUR 850.00 For Business Accounts Only

Morningstar | Thomson Reuters Emerges From Its Divestiture a Stronger, More Nimble Company

Now that Thomson Reuters has shed 55% of its finance and risk business, it can get to work investing in its higher-return businesses in legal data and accounting software. Going forward, the company will be divided into five segments: Legal Professionals, Corporates, Tax Professionals, Reuters News, and Global Print. The company no longer reports its results based on products but on customer type. Legal professionals now accounts for more than half of the company’s operating income. Given Thomson Reuters’ balance sheet’s newfound flexibility after the divestiture, we would expect the company to make tuck-in acquisitions that can be sold across its client base. In the short run, this is probably the company’s easiest path to accelerating growth. That said, within Legal, Thomson Reuters’ sales to the U.S. government have been accelerating as a result of the company’s Investigations and Public Records products. We anticipate this growth in sales to government entities will persist while increasing its contribution to the company’s overall consolidated results. Investors should not sleep on the performance of Refinitiv and Tradeweb, the carve-out’s previously hidden asset that operates a rapidly growing fixed income exchange. After Tradeweb’s initial public offering, it appears Blackstone has been able to unlock significant value in Refinitiv. Prior to the IPO, Thomson Reuters indirectly owned a 22.5% stake in rapidly growing Tradeweb. In addition, Refinitiv will continue to benefit from Tradeweb as Refinitiv entered into a tax receivable agreement. This agreement will likely result in Tradeweb continuing to make large cash payments to Refinitiv. Finally, much of Thomson Reuters’ near-term success will be determined by its ability to increase margins resulting from restructuring after the Refinitiv transaction. In 2019, the company expects $330 million in one-time costs that it intends to eliminate by 2020. Though we believe Thomson Reuters can increase operating margins substantially, we hope the company doesn’t sacrifice investment in new products for near-term gains in profitability.
Underlying
Thomson Reuters Corporation

Thomson Reuters provides source of news and information. Co. operates three business: Financial & Risk, a provider of news, information and analytics, enabling transactions and connecting communities of trading, investment, financial and corporate professionals, as well as a provider of regulatory and operational risk management solutions; Legal, a provider of online and print information, decision tools, software and services that support legal, investigation, business and government professionals; and Tax & Accounting, a provider of integrated tax compliance and accounting information, software and services for professionals in accounting firms, corporations, law firms and government.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Colin Plunkett

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