Why Thomson Reuters Corporation Is About to Dominate the Competition

Thomson Reuters Corporation (TSX:TRI)(NYSE:TRI), along with CME Group, won the right to manage the silver fix. Here’s why this is a game-changing development.

| More on:
The Motley Fool

Stiff competition has resulted in Thomson Reuters Corporation’s (TSX:TRI)(NYSE:TRI) recent earnings reports showing that a major barrier to the company’s growth has been its struggle to grow revenue in certain sectors of its business. One sector that has seen challenges is the financial and risk segment, whose revenues declined by 2% in the second quarter.

The challenges of competition

Part of the reason Thomson Reuters has struggled to grow its revenue in that segment is stiff competition.  The company’s main rival in that segment is Bloomberg LP while there are many other small competitors, too, such as Capital IQ. In order for Thomson Reuters to grow in that sector, it has to distinguish itself from the competition, and the latest developments show that it may accomplish exactly that.

While Thomson Reuters and Bloomberg each control about a third of the business, the latter may soon start to lose its position. Wall Street has grown somewhat annoyed with Bloomberg’s dominance in the sector, particularly after it came to light that Bloomberg journalists were obtaining some highly confidential information through the terminal. As a result, other companies have been working on programs that would be stronger competitors to Bloomberg’s offerings.

So how does this relate to Thomson Reuters? While Bloomberg may be suffering from a bit of negative PR, Thomson Reuters just got a really healthy dose of positive PR. Thomson Reuters recently had a game-changing business development when it won the right to manage the daily silver fix with CME group. This win has positioned the company well to also win the right to manage the daily gold fix.

One down, one to go

Back in April, the four banks that participated in the silver fix and the London Bullion Market Association announced they would stop administrating silver prices in August. The development followed increased scrutiny on the financial sector, which included allegations of price fixing by the banks participating in the silver fix. Recently, the member banks and the LBMA announced their intent to start a similar electronic pricing system for gold starting in October and have asked interested firms to send in proposals to replace the current system. Thomson Reuters and CME Group have also responded, saying that they will work together and consult with gold miners and consumers to come up with a new proposal for the gold fix.

We are not exactly sure what competition Thomson Reuters will face to win the right to run the gold fix, but its competitors for the silver fix included Bloomberg LP, ETF Securities, Intercontinental Exchange Inc.(NYSE:ICE) Platts, The London Metal Exchange, and Autilla — a very strong group of competitors.

While winning the silver fix was definitely a positive for Thomson Reuters, if the company also wins the gold fix, it will have achieved a major milestone that could help it differentiate itself from the competition and attract new customers. This in turn would be a meaningful move in the right direction in terms of increasing its revenue, which could be a major positive for its share value.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Leia Klingel has no position in any stocks mentioned.

More on Investing

Oil pumps against sunset
Energy Stocks

Lower Loonie? This Sector’s a Gusher Anyway

If the Canadian dollar weakens, this one industry is set to make enormous profits, and investors can get in on…

Read more »

Stocks for Beginners

3 No-Brainer Stocks to Buy Under $13

These three stocks are cheap and easy buys if you want some quick wins in the next while. Just make…

Read more »

Various Canadian dollars in gray pants pocket
Investing

Want Decades of Passive Income? 2 Stocks to Buy Right Now

These top dividend stocks have great track records of distribution growth.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Here Are My Top 5 Dividend Aristocrats to Buy Right Now

Canadian National Railway (TSX:CNR) is a Dividend Aristocrat with 27 years of dividend growth.

Read more »

Woman has an idea
Dividend Stocks

The Smartest Canadian Dividend Stocks to Buy With $500 Right Now

Besides their years-long dividend-growth track record, the strong fundamentals of these Canadian dividend stocks make them really attractive to buy…

Read more »

Electricity pylons against a sunset
Energy Stocks

Northland Power Stock: Buy, Sell, or Hold?

Northland Power (TSX:NPI) stock continues to climb on the back of strong earnings, but with a CEO and president leaving,…

Read more »

retirees and finances
Dividend Stocks

No, the CPP Didn’t Squander $46 Billion of Taxpayer Money

The Globe and Mail claimed that the CPP Board mismanaged Canadians' money, but it beat the returns earned by the…

Read more »

Caution, careful
Cannabis Stocks

I Wouldn’t Touch This TSX Stock With a 60-Foot Pole

I wouldn't touch Canopy Growth Corp (TSX:WEED) stock with a 60-foot pole.

Read more »