UBS Analyst Lowers Expectations for Thomson Reuters

USB analyst Jeffery Fan cut his revenue assumptions, earnings estimates and  target price for Thomson Reuters Corp. (TRI) on Tuesday to account for an expected lag between the ongoing messiness in financial markets and its effect on the company.

Mr. Fan now expects sales from the company’s markets division – which accounts for 60% of total revenue – to hit a trough in the first quarter of 2010. He does not expect revenue in that division to start growing again until 2011.

Mr. Fan wrote in a note to his clients:

Typically, contracts with the major investment banks are done on a 12 month basis, but cancellations can be made at the end of every quarter with a notice period of three months. Therefore, the bulk of the impact from the closure of Bear Stearns and other investment banking job cuts made in Q2 2008 will not be felt until Q4 2008.

Mr. Fan lowered his target price to C$23.50 from C$28.00 and maintained his "sell" rating.

However, Mr. Fan did note that he expects Thomson Reuters will fare better in this downturn than its main competitor – Bloomberg – and even gain market share from the latter.
 
Thomson dominates in foreign exchange, which is holding up well so far. Bloomberg’s strength lies in fixed income, which Mr. Fan said will see
deeper cuts relative to other asset classes.