Thomson Reuters shares take beating

On the London Stock Exchange, the shares closed at 1,400 pence, a drop on the day of 7.84 per cent.

The losses were worse in North America where there were falls of more than 10 per cent.

In New York, the stock lost 10.93 per cent of its value to close at $29.41 on the New York Stock Exchange and 10.43 per cent to $146.73 on NASDAQ.

On the Toronto Stock Exchange, Thomson Reuters tumbled to C$31.25, down 10.59 per cent.

Canada’s National Post said that with bankrupt Lehman Brothers accounting for an estimated 1 per cent of Thomson Reuters’ revenues, assuming most of this is lost, it means a 3 per cent downgrade to the company’s 2009 earnings per share (EPS).

Merrill Lynch, which agreed to sell itself to Bank of America for about $50 billion, likely has a similar amount to Lehman, UBS Securities said in a report.

“Given the lag factor between job cuts and cancellations, we believe the brunt of the investment banking downturn is likely to be felt from Q4 2008 onwards and ongoing investment banking consolidation will weigh on sentiment,” UBS analyst Jeffrey Fan told clients.

During the 2002-2004 downturn, Thomson’s Markets business lost 18 per cent of its revenues from peak to trough, he said. While things are different this time, Fan sees substantial downside risks to conservative assumptions of flat Markets growth in 2009 and 2010.

The analyst said that with Thomson Reuters already trading at a premium of 17 times 2009 estimated EPS, the additional downside risk to earnings makes the risk reward “unattractive”. He continues to rate the shares a Sell with a $28 price target.

Don Vialoux, a Canadian chartered market technician, said Thomson Reuters currently has a negative technical profile. Intermediate trend is down. The stock trades below its 200-day moving average and on Monday morning broke below support at C$33.75 and its 50-day moving average. Support exists at C$27.51, he added. ■