Wall Street layoffs to impact Thomson Reuters results

UBS analyst Jeffrey Fan, who rates the stock a sell, is calling for about four per cent organic growth, in line with most estimates. He reiterates his view, however, that the division could see revenue declines of about five per cent for next year, given the time lag between layoffs at investment banks and the impact on the company’s bottom line.
The firm’s markets business is susceptible to downturns in the financial services sector because it depends on banks and insurance firms to buy its data and computer terminals, National Post said.

“Until investors are comfortable that market revenues have reached a trough, we believe [Thomson Reuters] is likely to underperform,” Fan wrote in a note to clients.

The analyst has previously written that he does not expect a share price recovery for Thomson Reuters until at least the middle of next year.

National Post said the company’s stock is down about 30 per cent year to date.

The Associated Press said the July-September results could show some fallout from the financial crisis but much of the effect would not be seen until later quarters because of a lag in data-terminal subscriptions.

“Thomson Reuters will be somewhat insulated from the negative effects either way,” it said. “Its markets division, in which its data-terminal business falls, accounted for only about 35 percent of the company’s profits in the first half of the year. Other businesses, such as professional publications for lawyers and accountants, remain strong.”

AP said analysts polled by the company’s Thomson Reuters service expect, on average, earnings of 34 cents per share on revenue of $3.25 billion.

Looking ahead, it said that in the fourth quarter more fallout was expected from the financial crisis as subscription numbers catch up with the disappearance of major clients. ■