NEW YORK Thomson Reuters Corp (TRI.N)(TRI.TO) reported higher-than-expected quarterly profit on Thursday but its revenue missed forecasts and investors showed concern that one gauge of future demand from financial clients declined for the first time in almost three years.
The news and information company's Financial & Risk unit, its biggest, showed cancellations outpacing sales for the first time in 11 quarters, helping push the stock down 3.8 percent.
Revenue rose 1 percent to $1.5 billion in Financial & Risk, which provides news and analytics to banking, investment and other professional clients and accounts for half of total company revenue.
But the division's "net sales" decline after 10 quarters of increases was called and area of concern by several analysts - including Bank of America Merrill Lynch, RBC and Macquarie Research.
"The net sales being down in the quarter is probably why the stock is down," said Doug Arthur, managing director at Huber Research Partners, LLC.
"They've had a blip," he said. "That's clearly a disappointment ... that has ramifications for quarters down the road."
Asked about the F&R business, Chief Executive Jim Smith said in an interview, "The big European banks, and to a lesser extent Russia and Brazil, impacted our financial business disproportionately this quarter," adding the company is well-positioned to help clients in an uncertain regulatory and economic environment.
The F&R unit did not see a big swing in demand, Smith later told analysts on a conference call.
"In this low-growth environment, in any given quarter, one or two contracts can determine if we're above-the-line positive or below-the-line negative," he said. "There wasn't some dramatic shift."
PROFIT TOPS ESTIMATES
Quarterly net earnings were $2.24 billion, or $3.03 per share, compared with $417 million, or 53 cents a share, in the year-ago quarter.
Excluding charges and earnings from discontinued operations, the company earned 60 cents per share, 2 cents above analysts' average forecast, according to Thomson Reuters I/B/E/S.
In October, the company closed its sale of its Intellectual Property & Science business for $3.55 billion, helping the quarter's bottom line.
Total company revenue of $2.86 billion was slightly below Wall Street estimates of $2.89 billion.
Thomson Reuters, parent of Reuters News, competes for financial customers with Bloomberg LP and News Corp's (NWSA.O) Dow Jones unit. Reuters News sales rose 5 percent in the fourth quarter to $77 million.
Revenues at the Legal division were flat at $864 million; Tax & Accounting revenue increased 2 percent to $416 million.
Earlier this week, Thomson Reuters said it acquired Clarient Global LLC, a platform for client and customer data, and Avox Limited, a supplier of legal entity data. Terms were not disclosed.
CEO Smith said the company was open to making strategic, 'tuck-in' deals but, overall, M&A was not going to be a large aspect of its strategy.
Thomson Reuters' board also approved a 2-cent increase to its annual dividend, to $1.38 per share, and said it would boost its stock buyback by $1 billion.
The company said it aims to accelerate revenue growth in 2017, forecasting a low-single digit sales increase, before currency impact. It estimated 2017 adjusted earnings per share of $2.35, in line with current Wall Street estimates.
Thomson Reuters shares were down 3.2 percent to $42.96 in mid afternoon New York trading, and by a similar amount on the Toronto Stock Exchange.
(Reporting By Nick Zieminski in New York; Editing by Lisa Von Ahn and Alden Bentley)