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It's been a good week for Thomson Reuters Corporation (TSE:TRI) shareholders, because the company has just released its latest third-quarter results, and the shares gained 6.1% to CA$110. It looks like a credible result overall - although revenues of US$1.4b were what the analysts expected, Thomson Reuters surprised by delivering a (statutory) profit of US$0.48 per share, an impressive 35% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Thomson Reuters from 14 analysts is for revenues of US$6.24b in 2021 which, if met, would be a satisfactory 4.8% increase on its sales over the past 12 months. Statutory earnings per share are forecast to dive 56% to US$1.66 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$6.22b and earnings per share (EPS) of US$1.85 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 6.1% to US$84.76, suggesting the revised estimates are not indicative of a weaker long-term future for the business. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Thomson Reuters analyst has a price target of US$126 per share, while the most pessimistic values it at US$83.39. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that Thomson Reuters is forecast to grow faster in the future than it has in the past, with revenues expected to grow 4.8%. If achieved, this would be a much better result than the 18% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 4.3% next year. So it looks like Thomson Reuters is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Thomson Reuters going out to 2022, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 4 warning signs for Thomson Reuters (1 is a bit concerning!) that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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