Thomson Reuters Declines After Predicting Sluggish Growth

Thomson Reuters Corp., a provider of news and information services, declined the most in more than six months after the company predicted slow growth and narrowing profit margins in 2013, and announced plans to cut 2,500 jobs.

Revenue will increase in the “low single digits,” the company said today in a statement. Its adjusted profit margin -- based on earnings before interest, taxes, depreciation and amortization -- will range between 26 percent and 27 percent this year. The figure was 28.2 percent in the fourth quarter.

Thomson Reuters’s Wall Street customers continue to cut spending in the face of a sluggish economy, said Brian Yarbrough, an analyst with Edward Jones in St. Louis. That’s hurting demand for products such as Eikon, an information terminal for traders. The New York-based company doesn’t expect to see profit in the division that produces Eikon until the second half of this year.

“Everyone was expecting to see more in the first half of this year for that division,” Yarbrough said.

Thomson Reuters fell 2.3 percent to $29.96 at the close in New York, marking the biggest one-day decline since July 2012. The shares have gained 3.1 percent this year, compared with a 6.6 percent increase for the Standard & Poor’s 500 Index.

Cost Cutting

Thomson Reuters is midway through an effort to turn around its financial and risk-management operations, Chief Executive Officer James C. Smith said.

The company is relying on cost cutting to improve its profitability, though it continues to invest in some areas such as customer service. The job cuts, which Thomson Reuters announced on a conference call today, will come from the finance and risk business, affecting about 4 percent of the company’s total employees. The move will result in severance costs of about $100 million.

Fourth-quarter net income totaled $388 million, or 45 cents a share, compared with a loss of $2.6 billion, or $3.11, a year earlier, when the company wrote down the value of assets in its financial-services business. Excluding certain charges such as foreign exchange, profit totaled 60 cents a share last quarter. Analysts had projected 55 cents on average, according to data compiled by Bloomberg.

Revenue declined 5 percent to $3.4 billion from $3.58 billion in the period from a year earlier.

Bloomberg LP, the parent company of Bloomberg News, competes with Thomson Reuters in providing financial news and information.

(Updates share price starting in first paragraph.)
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