'Worst likely behind' Thomson Reuters' F&R business

It rated TRI stock a Buy and set a price target of $33.

BofAML believes the third quarter of last year should have been the low point for revenue growth in 2012.

It noted that in the fourth quarter, US finance industry headcount was down just 0.1 per cent year-on-year, but European finance headcount was down three per cent. “We are lowering our Financial & Risk segment forecasts to reflect these headwinds. EMEA is 44% of F&R’s revenue.” Headcount at 36 top European banks is down 8.6 per cent from peak levels and already back to 2006 levels. A further modest reduction is the most likely outcome in 2013.

BofAML noted that, in the last several conference calls with analysts, CEO James Smith has stressed that TRI will take cost actions to preserve margins. “Recent press reports have suggested that TRI had sizable layoffs in early January (up to 3,000, ~5% of employees).”

It added: “TRI has a strong market position in financial and legal information. TRI has shown that it has a steady business even in turmoil. In our view, the worst is likely behind TRI in the Financial & Risk division. The Professional division remains strong.”

For 2014, BofAML still forecasts five per cent growth for both the Financial & Risk segment and the total company. ■