Thomson Reuters (NASDAQ:TRI) had quite the rocky Tuesday on the stock exchange. Before market open, the financial information and data company published its third-quarter figures, and the company’s twin misses on analyst estimates were not met with gratitude by investors. Those folks sold out of the stock to leave it with a nearly 10% loss in Tuesday trading.
The power of the big three
For the period, Thomson Reuters’ revenue jumped 10% on a year-over-year basis to $1.83 billion. Net income not under generally accepted accounting principles (non-GAAP, or adjusted) also headed north, rising at roughly the same rate to $350 million ($0.81 per share).
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Analysts were expecting more robust growth in both metrics, however. Their consensus revenue estimate was nearly $1.91 billion, and their average adjusted profitability was $0.89 per share.
Thomson Reuters’ top-line growth was driven by gains in its “big three” customer segments. Collectively, the trio — legal professionals, corporates, and tax, audit, and accounting clients — were responsible for 88% of the company’s third-quarter revenue. As a group, their take increased by 10% year over year.
Still a pricey stock
Thomson Reuters also updated its guidance to reflect the sale of its global print business, which was divested on Oct. 1. It now believes its annual revenue growth rate will be 9.5% for 2026, reflecting the continued rise of the big three; that’s up from the previous forecast of 8%.
While the quarter wasn’t awful on its surface, Thomson Reuters is expensive on valuation — its stock’s P/E-to-growth (PEG) ratio is almost 4.7, whereas a 1 is traditionally considered fairly valued. Given that, it’s likely investors were expecting not only a double beat on analyst estimates, but a very convincing one. Personally, I think Thomson Reuters is doing an admirable job growing its business, but I wouldn’t be a buyer at these levels.
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