"While post-tax proceeds of $3.2–3.4 billion (5–10 percent tax on sales price) is a pleasant surprise, the limited buybacks ($1 billion) will likely leave equity-holders wanting more," analyst Manav Patnaik wrote in a note.
"With interest rates at historic lows (& CP at ~1 percent vs. rest 4–5 percent), we were fully expecting more buybacks," Patnaik continued.
The company plans to use $1 billion of proceeds to repurchase shares, which are part of the previously announced $1.5 billion program. It plans to use the balance proceeds to pay down debt and reinvest in the business.
Meanwhile, the analyst slashed his buyback expectations for FY16–17 to $2.8 billion from $4 billion. Patnaik's FY17 EPS estimate stays flat at $2.34.
"While TRI's adjusted EBITDA margin will shrink ~50bps, strategically the portfolio pruning allows for a sharpened focus on 'the intersection of global commerce & regulation,' as IP&S historically offered limited cross-sell opportunities," Patnaik highlighted.
The analyst has an Equal-Weight rating and $40 price target on the stock, which is currently up 1.69 percent on the day to $42.18.
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