Thomson Reuters shares raised to 'sector outperformer'

With growth prospects on the horizon, product investments and Reuters synergy efforts, analyst Robert Bek said he expects the company to increase its revenue.

“We expect Thomson Reuters to soon post outsized revenue gains, material operating leverage benefits, and large free cash flow generation,” he wrote in a note to clients. “The current valuation does not yet reflect this potential.”

The company has invested $1 billion in initiatives including online financial video news service Reuters Insider and Eikon, a desktop trading terminal for financial professionals.

The analyst said the company still trades light of its longer-term trends. He added that he sees room for reversion towards historical ranges as fundamentals firm up.

“We continue to believe that Thomson Reuters should be a core holding for investors, with a handful of evidence pointing to a more concrete recovery and a fourth-quarter dividend increase expected,” said Bek, who raised his price target on the stock to $45 from $41.

Thomson Reuters shares have gained about 12 per cent since mid-November, closing at just over $40 on Monday. Results for 2010 Q4 and full year are due to be announced on 10 February. ■