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

Double exposure of a businessman and stairs - Business Success Concept
Investing

Better Buy: RBC Stock or the Entire TSX?

Royal Bank of Canada (TSX:RY) is a robust stock, but the index fund could be better long term.

Read more »

Family relationship with bond and care
Investing

Retirees: 2 Top TSX Dividend Stocks to Buy for TFSA Passive Income

Top TSX dividend stocks now trade at discounted prices for TFSA investors seeking passive income.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Metals and Mining Stocks

Beat the TSX With This Unstoppable Dividend Stock

This dividend stock continues to outpace the TSX and then some, providing you with a dividend that you'll want to…

Read more »

Energy Stocks

Here’s My Top Stock to Buy Now, and it’s Not Even a Question

Tourmaline is a quality energy stock trading on the TSX. Here's why I remain bullish on TOU stock right now.

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Selling Losers Before 2023? Buy These 2 TSX Stocks With the Proceeds 

There is one month to 2023. Now is the time to sell your loss-making stocks, take the tax advantage, and…

Read more »

A meter measures energy use.
Dividend Stocks

TFSA Investors: 3 Safe Utility Stocks to Buy and Hold for Decades

Here are three top utilities to spend some fresh TFSA cash on in the new year.

Read more »

money cash dividends
Dividend Stocks

TFSA Investors: An Easy Way to Boost Your Payouts to $350 Per Month

Because of the tax-free nature of the TFSA, investors have several advantages, especially when buying high-quality dividend stocks.

Read more »

Piggy bank next to a financial report
Investing

How to Turn $10,000 Into $200,000 for Retirement

Buy top dividend stocks and use the distributions to acquire new shares.

Read more »