Thomson Reuters Corp reported lower quarterly profit and revenue that were slightly below Wall Street expectations, but said sales trends pointed to a return to revenue growth this quarter.
The results show that Thomson Reuters is gradually emerging from the shadow of the financial crisis, which triggered layoffs on Wall Street and cancellations of subscriptions to trading terminals and products for legal professionals.
Underlying operating profit fell 17 percent to $655 million in the second quarter, and adjusted earnings per share fell to 47 cents from 58 cents a year earlier, the news and data provider said on Thursday.
Analysts on average were expecting earnings of 48 cents per share, according to Thomson Reuters I/B/E/S.
Revenue from ongoing businesses fell 2 percent to $3.22 billion. Analysts on average were expecting $3.23 billion.
While our markets are only slowly improving, we have seen accelerating results in terms of revenues, net sales and customer uptake of our new products, Chief Executive Thomas Glocer said in a statement.
Based on these encouraging trends, we expect that Thomson Reuters will return to revenue growth in the third quarter.
The company reiterated its forecast that 2010 revenue would be flat to slightly down compared to 2009, and that net sales would strengthen this year.
From an organic revenue growth perspective, (it was) a little bit lighter than what we were looking for, but again I would emphasize that we knew Q2 was going to be the last of the weak quarters, said RBC Capital Markets analyst Drew McReynolds. I don't think the slight miss on organic revenue growth is going to be a major factor for investors out there.
Thomson Reuters, like Bloomberg LP and other companies that serve financial customers, gets much of its revenue from long-term subscriptions.
While net sales improved in the quarter, revenue was still down year-on-year due to the delayed impact of canceled subscriptions.
Thomson Reuters is also making big investments in new products for financial market traders and lawyers, which has pressured margins. Its operating margin fell to 20.4 percent from 24.2 percent a year earlier.
In the Markets division, which serves the financial industry, revenue fell 4 percent from the same quarter a year earlier. Revenue from the division was up from the first quarter, excluding adjustments for currency, marking the second consecutive quarter of sequential growth.
Revenue rose 2 percent in the Professional division, which sells databases and other information reservoirs to lawyers, accountants, scientists and healthcare workers.
Thomson Reuters said sales of WestlawNext, a new version of the company's Westlaw deep information database for lawyers, were well ahead of expectations, with about 5,700 customers buying the product since launch in February.
Competition is growing in the legal market from Bloomberg Law, a rival to Westlaw and Reed Elsevier's Lexis Nexis.
Reed Elsevier said earlier on Thursday that underlying revenue returned to growth in the first half, beating expectations. It said, however, that the recovery of its professional publications would be slow.
Dutch competitor Wolters Kluwer on Wednesday reported a rise in first-half profit, though revenue was flat, and analysts said the results were as good as could be expected in a difficult market.
The Reuters news agency business reported a 3 percent fall in revenue, but net sales turned positive after it won a contract with Time Warner Inc's CNN cable news network.
Thomson Reuters said its online video news service, Reuters Insider, which launched in the quarter, had 40,000 subscribers in about 8,000 companies.
(Additional reporting by Georgina Prodhan in London. Editing by Tiffany Wu and Ted Kerr)