Bank Of America Upgrades Thomson Reuters On Accelerating Growth, Attractive Valuation

It’s been a good year for Thomson Reuters Corp TRI, but one Wall Street analyst said Monday there’s even more upside ahead for the stock.

The Analyst

Bank of America analyst Gary Bisbee upgraded Thomson Reuters from Neutral to Buy and raised his price target from $73 to $78.

The Thesis

Bisbee said a combination of accelerating growth and an attractive valuation make Thomson Reuters a solid investment.

“We like the combination of accelerating organic revenue growth, margin expansion, strong cash flow, and a healthy dividend (2.1% yield), all within a business that is highly defensive,” Bisbee said in the upgrade note.

Thomson Reuters’ organic revenue growth has expanded from just 2% in 2017 to between 3.5% and 4% in 2019. Bisbee expects that growth to ramp to between 4% and 4.5% next year.

At the same time, Bisbee is projecting double-digit shareholder returns over the next several years thanks to solid earnings growth and the solid dividend. Meanwhile, Thomson Reuters could potentially supplement its organic revenue via M&A and share buybacks given its robust cash flow, Bisbee said.

As the company’s organic revenue expands more in-line with its information services peer group, Bisbee said the stock will also likely close its valuation discount gap as well.

Benzinga’s Take

The defensive nature of Thomson Reuters stock, including its dividend yield and its potential valuation support, may actually help it outperform given the recent market rotation from growth stocks to value stocks. On Friday, JPMorgan said it expects this rotation to value stocks will continue for at least another two quarters.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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