Thomson Reuters Pushes Unscathed Through Market Correction, Delivers 70%-Plus One-Year Asset Appreciation (TRI)

Despite facing a significant market correction in late 2018, the Thomson Reuters Corporation (NYSE:TRI) was able to grow its share price with minimal interruptions in order to reward shareholders with capital gains of more than 70% over the trailing one-year period.

While growing at a lower rate than the surge over the past 12 months, Thomson Reuters Corporation’s share price was still able to advance by encountering only a couple substantial pullbacks in more than a decade. The share price lost nearly 60% of its value in the aftermath of the 2008 financial crisis. After attempting to recover those losses, the share price dropped again and lost more than 40% in 2011 before embarking on another uptrend.

However, this uptrend lasted long only enough for the share price to recover completely from the effects of the 2008 crisis by late 2017. Unfortunately, the share price could not extend these gains. After the trend reversed direction, the share price fell more than 20% before bottoming out in early May 2018. This was right before the beginning of the trailing 12-month period.

The steep share price growth after the most recent pullback lifted the 50-day moving average and pushed it above the 200-day average by mid-August 2018. Since crossing above the 200-day average in a bullish manner, the 50-day average has risen more than 17% above its 200-day complement. Furthermore, except for a three-week period in early 2009 and late 2018, the share price has maintained a steady position above both moving averages.

Wall Street analysts expected corporate earnings to miss their first quarter estimates. However, the Thomson Reuters Corporation estimates outperformed, and the share price jumped to its new all-time high.

Financial Results

Thomson Reuters announced its financial results for the first quarter on May 8, 2019 and reaffirmed guidance for the remainder of the year, as well as for the full-year 2020. Revenues advanced 8% year-over-year, from $1.38 billion in the first quarter last year to $1.49 billion for the most recent period. This was just marginally below the $1.5 billion analysts’ expectations.

Earnings grew 2% year-over-year to $274 million, or $0.23 per diluted share. Adjusted earnings per share (EPS) increased 29% from $0.28 in the first quarter last year to $0.36 in the most recent period, which beat analysts’ expectations of $0.25.

Based on first-quarter results, Thomson Reuters reaffirmed its guidance for the remainder of this year, as well as for next year. The company expects revenue growth between 7% and 8.5% for the full-year 2019 and between 3.5% and 4.5% for full-year 2020.

“The year is off to a solid start,” said Jim Smith, president and CEO of Thomson Reuters. “The trajectory of the business continued to improve on the progress made last year. Revenue growth is tracking to our outlook. Recurring revenue growth is the strongest we have seen in several years. Net sales are strong and our book of business continues to grow. Our transformation initiatives are on track and we are seeing good underlying margin improvement. We remain confident in our ability to achieve our 2019 and 2020 targets,” he added.

Thomson Reuters Corporation (NYSE:TRI)

Based in Toronto, Canada, and formed by the Thomson Corporation’s purchase of the London-based Reuters Group in 2008, the Thomson Reuters Corporation sells electronic content and services to professionals primarily on a subscription basis and operates through three business segments. The Financial & Risk segment offers critical news, information and analytics. Next, the Legal segment offers the critical online and print information, decision tools, software and services that support legal, investigation, business and government professionals. Furthermore, the Tax & Accounting segment provides integrated tax compliance and accounting information, software and services for professionals in accounting firms, corporations, law firms and government. Lastly, the Thomson Reuters Corporation also operates Reuters, which provides real-time multimedia news and information services to newspapers, television and cable networks, radio stations and websites.

Share Price

After a lengthy decline in early 2018, the share price reversed direction in the first week of May 2018 and passed through its 52-week low of $38.03 on May 29, 2018. The share price rose with minimal deviation for the remainder of the trailing 12 months. Even the overall market correction in the last quarter of 2018 had minimal effect on the Thomson Reuters stock price. The share price dipped briefly but continued its sharp uptrend immediately.

While the overall market and most equities hit 52-week lows on December 24, 2018, Thomson Reuters’ share price reversed its dip while still remaining 20% higher than the 52-low that it achieved in late May. By the end of trading on May 15, 2019, the share price advanced nearly 80% above its 52-week low from the end of May 2018 before closing at its new all-time high of $67.75. This closing price was 74% higher than it had been one year earlier and 83% higher than what it was five years ago.

While asset appreciation contributed most of the gains, Thomson Reuters rewarded its shareholders with combined total returns of 77.5% over the past year. The 20%-plus share price decline prior to the beginning of the trailing 12-month period limited total returns to 66% over the past three years. While a two-thirds gain on one’s investment over three years is generally a great rate of return, in this case it is less than the company’s one-year gains. However, long-term shareholders more than doubled their investment and have enjoyed total returns of 102% over the past five years.

Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.