As a backdrop, the Wall Street Journal, which is a subsidiary of
News Corp (
), published an article on 10/1 regarding an internal video sent to
employees by Thomson Reuters (
) CEO Jim Smith.
According to the article, Smith discussed the "...need to attack
internal bureaucracy" and "...ample opportunity inside the business
for us to continue to take costs out..." In response to the
article, management of TRI had no comment.
It is worth noting that TRI's legacy Financial & Risk
(F&R) systems are slated to be shut down while further
operational efficiencies are likely in headcount and systems
Areas of focus are in legacy "Legal" in addition to "Financial
& Risk" or F&R. This implies that prior efforts at
restructuring F&R may not be going as well as expected given
the need for further cuts.
Goldman Sachs, which has a neutral rating and a $37 price target
on the stock, views this as a modest positive (potential for
stronger EBITDA growth owing to additional expense reductions).
Recall that at the Communacopia Conference in September, Thomson
Reuters CEO Smith indicated that demand is mixed from sell-side
clients, although trends from buy-side customers are better.
Additionally, Smith noted that legacy shutdowns remain on
schedule, and TRI is seeing 1.5% to 2.5% price increases on
renewals. During Q&A, when asked about a potential break-up of
the company, he deflected, stating that it wasn't a focus.
On valuation, TRI trades at 10x next twelve-month earnings,
which assumes 2% revenue growth and 30% EBITDA margins, per GS
NWS 16.29 0.00 0.00
TRI 35.19 0.00 0.00
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