Nomura upgrades Thomson Reuters stock to Neutral
Monday 1 December 2014
Nomura Securities upgraded Thomson Reuters to Neutral from Reduce and raised its price target to $40.00 from $36.50.
Analyst Matthew Walker said Nomura’s original thesis in December 2013 was that TRI’s premium to Reed Elsevier was excessive given the company only had one per cent organic growth and traded at a price/earnings ratio of about 19 compared with about 16 for Reed Elsevier.
“It was also that net sales and Financial and Risk recovery would take longer than expected. Both of these views have played out with the stock now at parity with Reed Plc on P/E and net sales did take longer than expected to become positive. However, with organic growth set to improve to c2% in 2015 and with net sales now positive even in Europe and with the valuation now not at such a large premium, we believe there is no longer a strong case to remain on a Reduce rating.”
He said that although the financial business is not yet showing organic growth, the improvement in net sales should mean the decline moderates significantly in 2015 and the second-largest division (Legal) could benefit from a modest pickup in legal market conditions in the US. The buy-back and dividend will continue to be supportive, in our view."
Thomson Reuters traded in New York opened 1.5 per cent higher at $40.28. The company's Canadian shares opened in Toronto at C$46.42. ■
- Street Insider