* Q4 adjusted EPS $0.20 vs forecast $0.06
* Q4 Tax & Accounting revenue up 8 percent excluding currency
* CEO says M&A market is "frothy," valuations "challenging"
* CEO says company in early talks with some targets
* Shares up 5 percent to record high (Adds shares, CEO comment from conference call, analyst comment and bullet points)
By Matt Scuffham
TORONTO, Feb 26 (Reuters) - Thomson Reuters reported better-than-expected earnings on Tuesday, helping push its shares to a record high, and said it is continuing to look for acquisitions to bolster its Legal and Tax & Accounting units, where demand is up in part because of U.S. tax reforms.
Shares in the news and information provider rose 5 percent in early trading to C$73.24, marking a record high. They have benefited from the company buying back $10 billion worth of shares since August.
Thomson Reuters reported fourth-quarter revenue of $1.52 billion, compared with $1.41 billion a year ago. Earnings excluding special items were 20 cents per share, down from 22 cents per share a year ago but significantly above the average analyst forecast of 6 cents per share according to IBES data from Refinitiv.
Thomson Reuters sold a 55-percent stake in its Financial & Risk (F&R) unit to private equity firm Blackstone Group LP last October in a deal that valued the unit, now a standalone business called Refinitiv, at about $20 billion.
The company has set aside $2 billion of the $17 billion proceeds from the Blackstone deal to make purchases to help grow its Legal, Tax & Accounting and Corporates businesses.
"We have a number of potential targets," Chief Executive Jim Smith told analysts on a conference call. "We're in the process of prioritizing those targets and, in some cases, beginning some discussions, but we're not on the verge of pulling the trigger on something big right now."
Smith told Reuters News in an interview that market valuations were "challenging."
"We have to make certain we find not only the right strategic fit but the fit that makes financial sense as well. It's a pretty frothy M&A market at the moment," he said.
Smith said U.S. tax reforms were helping stimulate demand for the company's tax and accounting products.
"Rapid regulatory change is good for our business," he said.
Legal, Corporates and Tax & Accounting are the three biggest units following the F&R deal.
Excluding exchange rates, Legal revenue rose 4 percent during the quarter to $599 million. Tax & Accounting sales rose by 8 percent to $248 million. Sales to corporate clients rose by 7 percent to $315 million.
"We were encouraged by sales growth during the quarter," said Edward Jones analyst Brittany Weissman. "There are still many moving pieces in the results following the sale of the F&R business, but Thomson Reuters is seeing early signs of success in accelerating sales growth and improving profitability."
Earnings were better than expected due to a lower tax rate and the share buyback, Weissman said.
For 2019, the company forecast adjusted earnings of $1.4 billion to $1.5 billion, up from $1.4 billion in the current year.
The company has retained a 45-percent stake in Refinitiv, which sells data and news primarily to financial customers. Under the agreement with Blackstone, Refinitiv will make minimum annual payments of $325 million to Reuters over 30 years, adjusted for inflation, to secure access to its news service, equal to almost $10 billion in all.
Refinitiv revenue grew by 3 percent, excluding currency movements, to $1.55 billion during the quarter, Thomson Reuters said.
Thomson Reuters, controlled by Canada's Thomson family, is the parent of Reuters News. Revenue from Reuters News more than doubled to $155 million, reflecting a first-time contribution from the Refinitiv deal. Smith told analysts on a conference he expects the division to be a stronger contributor to the overall profitability going forward.
For 2018 as a whole, Thomson Reuters reported overall revenue growth of 4 percent. Revenues excluding the impact of the Blackstone deal rose by 2.5 percent.
For 2019, the company is forecasting organic revenue growth of 3 to 3.5 percent. For 2020, it expects revenue growth of 3.5 percent to 4.5 percent, in line with December guidance.
(Reporting by Matt Scuffham Editing by Nick Zieminski)