Thomson Reuters Q2 was better than the street thought, TD says

Thomson Reuters (Thomson Reuters Stock Quote, Chart, News, Analysts, Financials TSX:CCA) shares dropped more than 10% on August 7 following its second-quarter earnings, but TD Cowen analyst Vince Valentini called the results solid and slightly ahead of expectations, particularly on margins.

He said the decline was driven more by investor disappointment over the lack of new 2026–2027 targets than by any weakness in the Q2 numbers.

“The stock dipped because no new 2026/2027 targets were provided (those will come with time in our view), and because a few comps have been weak recently,” Valentini said. “Although we are confident in TRI’s guidance for 2025-2026, it may not be enough to continue upward momentum for the stock. We believe that the valuation is full and that some passage of time and some sideways trading will be required before another leg up may be possible. This may leave TRI with asymmetric downside risk (from any macro, competitive, or execution negative surprises) versus near-term upside potential. As such, we maintain our ‘Hold’ rating.”

He raised his EPS estimates across all forecast years, citing better-than-expected organic margin performance and newly lowered projections for depreciation, amortization and interest expense. However, he also removed assumed future acquisition contributions, slightly reducing his revenue and EBITDA projections. As a result, he cut his price target to $275 from $305 while reiterating his “Hold” rating.

The company reported Q2/25 revenue of US$1.78-billion, a 3% year-over-year increase, but just shy of consensus expectations of US$1.79-billion. Adjusted EPS of US$0.87 beat the US$0.82 average forecast. Valentini said he’s keeping his Q3 margin forecast at 37%, despite company guidance of 36%.

“There is a clear pattern in our view of management being prudent and cautious with quarterly margin guidance,” he noted.

He also maintained that TRI is likely to outperform its full-year margin target.

“We continue to believe that management is being conservative with its margin guidance for both 2025 (approximately 39%) and 2026 (at least 50bp of expansion),” he said. “So our estimates on that front have increased subsequent to the margin beat in Q2/25, and we remain above guidance. We also continue to forecast a more material increase in margins in 2027, to 42.3%.”

Valentini sees further upside potential if the company continues automating internal processes, including through the adoption of AI. He noted management’s view that 110 basis points of annual margin expansion is achievable when revenue growth exceeds 7%.

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