Q2 results: focus on two-year outlook

Reuters’ revenue fell 17 per cent during the bear market in 2002, and while Fan believes the company will fare better this time around, he sees considerable downside risk to consensus estimates of flat revenue growth over the next two years, Financial Post of Toronto reported in a blog posting under the headline ‘Thomson Reuters vulnerable to economic slowdown’.

The company’s markets business is susceptible to downturns in the financial services sector because it depends on banks and insurance firms to buy the data and equipment it produces.

“If consensus estimates hold, then [Thomson Reuters] still trades on a premium to its peers,” Fan wrote in a note to clients on Wednesday.

The analyst’s worst case scenario is a 50 per cent drop in earnings per share next year if the company suffers on the same level it did in the last downturn. He has a Sell rating on the stock.

Financial Post said that of the analysts Bloomberg lists covering Thomson Reuters stock, nine have Buy recommendations, five have Hold and four Sell. ■