Thomson Reuters Corp. (TRI) is managing very well during the current rescission and is laying a foundation for solid earnings and future growth.             

Thomson Reuters Corp is not the most exciting company but by paying a $1.12 dividend to yield 4% the stock should provide investors with an excellent long-term return.  On April 17, 2008, Thomson Corp. acquired Reuters Group, a 156-year-old news service company, for $17.2 billion and created a new financial information giant. With 50,000 employees and operating in almost 100 countries, the new combined corporation controls 30% of the North American and 38% of European financial information and data markets.

Thomson Reuters Corp provides extensive legal, regulatory, tax, science, and health care information services through its electronic networks. Last year revenues totaled $13.4 billion and generated earnings of $3.3 billion, equal to $1.91 a share.

There was almost no business overlap between Thomson and Reuters. Reuters was, to a large extent, a news organization. Thomson sold its last newspaper chain years ago. Nevertheless, the companies expect to save more than $500 million per annum after three years through synergies.

Thomson Reuters Corp is in the right business. The days of lawyers, doctors, or pharmacists wading through piles of circulars to keep themselves up to date are long gone. Time is of the essence and they use on-line databases provided and updated by Thomson.  It's a growth industry, not entirely recession-proof, but certainly shielded during the economic downturn. Even more lucrative are TRI's on-line services to the financial community, now being aggressively expanded into China and India.

TRI is fundamentally strong with almost $1 billion in cash on the balance sheet and a projected $2 billion cash flow in 2009. The bonds are rated A-, an investment grade, by Standard & Poor's and Dominion Bond Rating Service.

Looking ahead, TRI is bound to be impacted in a negative way this year by the downturn in investment activity as institutions and brokers retrench but a lot of its services are now essential to the professional community and provide a solid earnings base.

Savings from the Reuters merger will continue to boost profit margins. All things considered and assuming that the recession is going to deepen, estimates show profit could dip to about $1.50 a share in 2009 but a recovery to the $2 range is likely in 2010. 

Thomson Reuters Corp is trading at $26 with a P/E of 14.5, and dividend yields of 4% are both attractive stats. I would look to buy TRI if it drops to about $24.50 about a 5% drop from current levels. The $24.50 level is a 61.8% retracement from the April high of $28.60 to the March low of $22. TRI is a long term play, I would set a trading target of $34 for TRI, just under the August 2008 high of $34.44 and were most of the trading action took place in the first half of 2008. I would set a protective stop at $22 (a close below $22).

Note: I do not own TRI