A Thomson Reuters office is shown in BostonEric J. Shelton/The Associated Press
Thomson Reuters Corp. boosted its profit target for 2017 after posting earnings per share that were well ahead of expectations for the second-straight quarter.
The news and information giant's second-quarter results were propelled by a modest uptick in revenue and stronger trends in subscriptions, particularly in the company's legal division.
As a result, Thomson Reuters increased its target for earnings per share to between $2.40 (U.S.) and $2.45, compared with previous guidance of $2.35. The company also boosted its outlook for adjusted earnings margins by half of a percentage point.
The firm is emerging from a years-long turnaround plan and projecting that its growth will begin to pick up in the back half of the year, as obstacles from billing changes, price adjustments and a gradual migration to new technologies that had dragged on the business are dissipating. European markets are still dogged by uncertainty arising from the forthcoming Brexit, but chief executive officer Jim Smith continues to see cautious optimism among U.S. businesses, in spite of recent turmoil in Washington.
"The second quarter for us was solid across the business," Mr. Smith said in an interview. "We would expect that trend in revenue improvement to continue over the second half of the year."
That acceleration is unlikely to be rapid. "This isn't a ship that turns quickly," Mr. Smith cautioned, given that the lion's share of revenue comes from subscriptions that are locked in for the course of a year. "But once it starts turning, it can develop momentum, and this is the kind of momentum we had expected to see."
The company is also ahead of schedule as it continues to build out a new technology hub in Toronto, with 105 hires so far, 40 per cent of whom are women. The tech centre is expected to create about 400 new jobs, and Mr. Smith said the first products developed there will be "in the market this year."
For the second quarter, which ended June 30, Thomson Reuters earned profit of $206-million, or 27 cents a share, down from $350-million and 45 cents per share in 2016. But the decline includes the loss of earnings from the intellectual property and science business the company sold last October, and from accounting revisions related to foreign-exchange rates.
Adjusted to exclude certain items, profit was 60 cents a share, up from 47 cents a share a year earlier, well ahead of the consensus of 52 cents among analysts surveyed by Thomson Reuters.
Second-quarter revenue was relatively flat compared with the prior year, at nearly $2.8-billion, but excluding the impact of foreign currencies, revenue rose 2 per cent.
The company lowered its costs as it continues to reap the benefits of a $212-million restructuring charge recorded last year. "We are encouraged by the steady simplification of the business and related cost-efficiencies," Drew McReynolds, an analyst at RBC Dominion Securities Inc., said in a research note.
Revenue in the company's largest division, financial and risk, was flat at $1.5-billion, but rose 2 per cent excluding the effects of currency. Most notably, new sales outpaced cancellations for the second consecutive quarter. And the Elektron data platform, which funnels data into trading rooms to be analyzed by computers, saw strong growth even as revenue from the desktop terminal business dipped by 5 per cent.
The legal division's revenue was also more or less flat at $842-million, but improved 1 per cent absent currency impacts. Results were hampered by the continued decline of revenue print products, down 8 per cent. But more importantly, legal subscriptions rose by 4 per cent. "Those are solid sticky, profitable revenues," Mr. Smith said.
The tax and accounting segment posted characteristically strong growth, beating expectations, with revenue up 8 per cent year over year. And revenue at the Reuters news division dipped by 5 per cent, reverting to normal levels after the company recorded a one-time item in the second quarter last year.
Woodbridge Co. Ltd., the Thomson family holding company and controlling shareholder of Thomson Reuters, also owns The Globe and Mail.
James Bradshaw