Thomson Reuters Is up 15% After Earnings: What Investors Need to Know

TRI (TSX:TRI) stock saw shares surge after earnings that not only demonstrated strong results for the quarter but offer the promise of more.

| More on:

It’s earnings season, and many Canadians likely have their eyes on the performers on the day. Companies such as the Big Six banks have been dishing out earnings this week, but there’s one that has climbed steadily and has yet to come back down.

That stock is Thomson Reuters (TSX:TRI), with shares climbing 15% after its earnings this month. And the stock has yet to come down! So, let’s look at what investors need to know after earnings and if now is a good time to invest.

What happened?

First, let’s go over the earnings themselves. TRI stock reported exceptional first-quarter results, reporting an 8% increase in revenue, reaching US$1.89 billion, with a notable 9% growth from its major segments (legal, corporate, tax, and accounting).

It was a strong start to the year, which led the company to slightly raise its annual revenue-growth expectations to 7%. In fact, according to one analyst, it was the strongest earnings seen by the company for some time. Shares then rose by 15% following the earnings announcement. 

The better-than-expected revenue growth and profits provided a solid foundation for investor confidence. And what’s more, the company went on to increase its dividend by a whopping 10%! Yet, there was even more growth outlined by the company as a potential revenue source.

Generative AI

Significant revenue was derived from highly profitable licensing deals for Reuters content with artificial intelligence (AI) companies. This boosted growth in the Corporate and Tax segments. Thomson Reuters’s new AI-based products, including the legal assistant CoCounsel powered by OpenAI’s ChatGPT, received positive client feedback.

Furthermore, the company plans to invest at least US$100 million annually in AI development. This indicates a long-term commitment to integrating AI into its offerings. The Reuters News division saw a 21% increase in revenue, largely due to one-time licensing deals with AI companies.

The continued customer uptake of AI offerings is expected to accelerate in the latter half of 2024 and into 2025. What’s more, price increases, high customer retention (91%), and potential new merger and acquisition opportunities are anticipated to support sustained revenue growth.

What to watch?

Of course, analysts had a few notes of caution to go along with the strong results. In particular, despite the strong performance, some analysts remain cautious due to high valuations. For example, one analyst noted the stock’s high valuation relative to other AI software peers like Microsoft.

Overall, the big key will be watching the development of generative AI in the future — especially considering that most analysts indeed revised their price targets upwards after the strong quarter.

Investors should, therefore, consider the company’s continued investment in AI, the potential for further revenue growth from new products, and strategic acquisitions as key factors supporting the bullish outlook on TRI stock. Yet, with shares now up 40% in the last year and a 1.24% dividend yield, it’s looking very attractive for investors today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Microsoft. The Motley Fool recommends Microsoft. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

Asset Management
Stocks for Beginners

TFSA: 4 Canadian Stocks to Buy and Hold Forever

Thinking about what to buy with the new TFSA contribution space in 2025? These four Canadian stocks are worth holding…

Read more »

concept of real estate evaluation
Stocks for Beginners

2 No-Brainer Real Estate Stocks to Buy Right Now for Less Than $1,000

These two real estate sector-focused stocks have the potential to deliver strong returns on your investments in the coming years.

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

stocks climbing green bull market
Stocks for Beginners

3 TSX Stocks Soaring Higher With No Signs of Slowing

Don't ignore stocks just because they look like they're at a high price. Instead, see exactly why they've driven so…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »