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Thomson Reuters profit beats on cost-cutting

(Reuters) – Thomson Reuters Corp (TRI.N) (TRI.TO) reported higher-than- expected quarterly earnings on Wednesday, bolstered by cost-cutting, and its shares rose about 2 percent.

Still, the global news and information company said revenue rose just 1 percent in the first quarter, mainly because of acquisitions.

The slow growth reflects the challenges Thomson Reuters faces from job cuts and other cost reductions at financial institutions and law firms, which account for the majority of its revenue.

Chief Executive Officer Jim Smith said in an interview that the Financial Risk business was still under pressure from restructuring at large European banks, although sales in North America, Latin America and Asia had improved.

In those regions, overall sales minus cancellations grew during the quarter.

Smith said net sales were trending better than last year, although he did not provide further details.

“We are going in the right direction, and we expect to see continued steady improvement,” Smith said. “We have turned the ship, but there is still a lot of work to do.”

Revenue in the Financial Risk division decreased 1 percent to $1.6 billion. The division, which accounts for more than half of Thomson Reuters’ total revenue, sells its flagship desktop product, Eikon, to bankers, retail brokers and other financial professionals.

The division’s “net sales are still a struggle because Europe is their biggest market,” said Evercore Research analyst Doug Arthur. “I think they are trying hard and making the right moves and cutting costs aggressively, but it’s not enough to get me off” an “equal weight” rating for the company.

Thomson Reuters said revenue in the Legal division, known for its Westlaw legal database, rose 2 percent to $803 million, lifted by acquisitions last year like information provider Practical Law.

Revenue in the Tax Accounting division increased 13 percent to $348 million.

Thomson Reuters reported first-quarter earnings per share of 46 cents, excluding amortization and other items. Analysts on average were expecting 38 cents, according to Thomson Reuters


Overall revenue from ongoing businesses increased 1 percent to $3.1 billion, in line with analysts’ estimates.

“Cost-cutting remains impressive, but there is still limited visibility on a recovery in revenue growth,” TD Securities analyst Vince Valentini wrote in a note to investors. “Headline profit results seemed to be well ahead of expectations, but this was only because of a shift in the timing of preannounced restructuring costs.”

Net income attributable to shareholders for the first quarter was $282 million, compared with a year-earlier loss of $31 million.

Thomson Reuters affirmed its full-year outlook and expects revenue to be unchanged from last year’s $12.5 billion.

Shares of Thomson Reuters were up about 2 percent at $35.56 on the New York Stock Exchange and C$38.93 on the Toronto exchange.

(Reporting by Jennifer Saba in New York; Editing by Lisa Von Ahn)

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Poor lung drug sales hit GSK in first-quarter, CEO wary on M&A

LONDON (Reuters) – GlaxoSmithKline’s (GSK.L) sales fell 10 percent in the first quarter as its flagship lung drug Advair struggled in a tough U.S. market, highlighting the kind of pricing pressures behind a wave of deals sweeping the sector.

GSK joined the deal-making bandwagon last week to trade more than $20 billion of assets with Swiss rival Novartis (NOVN.VX), representing the kind of targeted transaction that Chief Executive Andrew Witty said he much preferred to mega-mergers.

U.S.-based Pfizer (PFE.N) has rocked the industry by trying to buy GSK’s smaller British rival AstraZeneca (AZN.L) for $100 billion, but Witty said he was just an “interested observer” in that fight.

Asked if GSK could consider a “white knight” counterbid, he declined to comment specifically but told reporters that such broad-based deals were “distracting”.

GSK’s performance in the three months ended March was overshadowed by a 20 percent fall in sales of Advair in the United States, after one of the country’s largest healthcare providers stopped paying for prescriptions.

Sales of its new respiratory drug Breo have also been slower than anticipated due to delays in securing healthcare contracts for the medicine, although GSK expects things to improve from next month.

Alistair Campbell, an analyst at Berenberg Bank, said GSK’s reliance on Advair had long been a concern for investors, making new lung products vital for the future, and the unimpressive start for Breo in the U.S. market was disappointing.

GSK shares fell 2.4 percent by 1500 GMT. Deutsche Bank analyst Mark Clark said the worse-than-expected sales performance and the dropping of explicit sales growth guidance would lead analysts to question their profit assumptions.


Reported sales in the first quarter, which were hit by the strength of sterling, totaled 5.61 billion pounds ($9.45 billion), generating “core” earnings per share down 20 percent at 21.0 pence.

Analysts, on average, had forecast sales of 5.84 billion pounds and core EPS, which excludes certain items, of 20.7 pence, according to Thomson Reuters.

GSK said it still expected sales to grow over the year in constant exchange rate terms, after a 2 percent decline on this basis in the first quarter, but it is no longer giving a specific figure. Previously it had predicted 2 percent growth.

The company reiterated its target of increasing 2014 EPS by between 4 and 8 percent.

In addition to the weak Advair performance, GSK also continued to be held back by difficulties in China, where sales fell 20 percent from a year ago, following a damaging bribery scandal that broke last July.

The global drugs industry is having to contend with increasing pressure on healthcare spending, prompting a wave of restructuring as companies seek to focus on areas of strength and exit those where they lack the scale to compete.

CEO Witty aims to do that via his recent deal with Novartis to sell its cancer drugs and buy most of the Swiss group’s vaccines, with the two firms also creating an $11 billion-a-year consumer health business.

The revamp means GSK in future will get 70 percent of sales from its franchises in respiratory medicines, HIV, vaccines and non-prescription consumer health.

($1 = 0.5936 British Pounds)

(Editing by Mark Potter and Erica Billingham)

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Nuclear power producer Exelon to buy Pepco for $6.83 billion

(Reuters) – Exelon Corp said it would buy Pepco Holdings Inc for $6.83 billion, helping it overtake Duke Energy Corp as the biggest power distribution company in the United States.

The deal will allow Exelon to sell more power at stable rates set by regulators at a time when an abundance of cheap natural gas is dragging down power prices in the open market.

Exelon’s move to reduce its exposure to the vagaries of the wholesale power market comes as U.S. utilities struggle with falling electricity demand in both the open and regulated markets due to increased energy efficiency and a weak economy.

However, Exelon’s stock fell as much as 5 percent to $34.22.

“Some investors might question Exelon’s desire to increase the company’s regulated exposure at a time when power markets appear to be recovering,” said Wells Fargo analyst Neil Kalton.

The company defended the acquisition saying it was maintaining substantial exposure to the recovery in prices.

“The acquisition also supports our belief in the value of an integrated utility, with a balanced mix of regulated and non-regulated cash flows,” Exelon Chief Executive Chris Crane, who will lead the combined company, said on a conference call.

Exelon said its earnings from the regulated business is expected to rise to as much as 65 percent after the deal, from about 60 percent now.

Pepco’s shares rose as much as 18 percent and, on Wednesday afternoon, were trading slightly below Exelon’s offer price of $27.25 per share, despite fears of severe regulatory scrutiny for the deal.

However, two experts said the deal was unlikely to run into serious trouble from regulators, who most likely will include the U.S. Justice Department, the Federal Energy Regulatory Commission and public utility commissions in New Jersey, Delaware, Maryland, and the District of Columbia.

There is no antitrust issue since the two companies don’t have customers in the same areas, said Bruce McDonald, an antitrust expert with Jones Day law firm.

Pepco operates utilities in the District of Columbia, Delaware, Maryland and New Jersey, serving about 2 million customers.

Exelon’s utilities deliver electricity and natural gas to more than 6.6 million customers in Maryland, Illinois and Pennsylvania.

The acquisition would not deter Exelon from buying more renewable and conventional power assets, Crane said. At the same time, the company is looking to raise up to $1 billion by selling non-core assets, he said.

Weak power prices and consumption have spurred consolidation among utilities in the past three years, with Exelon itself having bought Constellation Energy for $7.9 billion in 2011. Duke Energy and AES Corp have also made acquisitions.

Exelon said it expected Pepco to “significantly” add to adjusted earnings in the first full year after the deal closed.

The company also reported a lower-than-expected profit for the first quarter, hurt by weak energy prices and a fall in nuclear and coal output.

Barclays, Goldman Sachs Co and Loop Capital Markets are Exelon’s financial advisers. Kirkland Ellis LLP is its legal counsel.

Lazard is Pepco Holdings’ financial adviser. Sullivan Cromwell LLP and Covington Burling LLP are its legal counsel.

(Additional reporting by Diane Bartz in Washington; Editing by Saumyadeb Chakrabarty and Savio D’Souza)

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U.S. private sector adds 220,000 jobs in April: ADP

NEW YORK (Reuters) – U.S. private employers added 220,000 workers in April, the highest amount since November and above analysts’ expectations, a report by a payrolls processor showed on Wednesday.

Gains in the prior month were revised higher, to 209,000 from 191,000. Economists surveyed by Reuters had forecast that the ADP National Employment Report would show a gain of 210,000 jobs in April.

The report is jointly developed with Moody’s Analytics.

(Reporting by Ryan Vlastelica; Editing by Meredith Mazzilli)

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U.S. mortgage market index hits lowest since December 2000: MBA

NEW YORK (Reuters) – Applications for U.S. home mortgages fell last week to their lowest level since December 2000 as both refinancing and purchase applications declined, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 5.9 percent to 333.2 in the week ended April 25. That was the lowest level since December 2000, the group said.

“Purchase application volume remains weak despite other data which indicated the overall pace of economic growth is picking up. The combination of higher rates, new regulation and tight inventory are all leading to a weaker spring market than we have seen in years,” said Mike Fratantoni, MBA’s chief economist.

The MBA’s seasonally adjusted index of refinancing applications declined 6.9 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 4.4 percent.

Fixed 30-year mortgage rates averaged 4.49 percent in the week, unchanged from the week before.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

(Reporting by Caroline Valetkevitch; Editing by Diane Craft)

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Euro recovers as inflation eases pressure on ECB

NEW YORK (Reuters) – Global equity markets edged higher on Wednesday as investors looked beyond weak U.S. economic growth data for the first quarter to focus on brighter prospects for the economy, while oil prices fell on record-high U.S. inventories.

Wall Street initially slid after the U.S. Commerce Department said gross domestic product expanded at a 0.1 percent annual rate in the first quarter, the slowest pace since the fourth quarter of 2012.

But stocks rebounded, as negative views were softened by the impact on the economy of an unusually cold and disruptive winter and as other data pointed to an upturn in the second quarter.

“There’s no hiding the fact the GDP number is a disappointment,” said Art Hogan, chief market strategist at Wunderlich Securities in New York. “The market is focusing on what economic data is telling us about Q2, and there’s a reason to believe the demand loss was more weather related than anything.”

Hogan cited other data released on Wednesday as evidence the second quarter will be stronger, including parts of the GDP report itself, a better-than-expected reading on business activity in the U.S. Midwest in April, and strong numbers on private-sector hiring in April.

The ADP National Employment Report showed private employers added 220,000 jobs payrolls in April, after increasing headcount by 209,000 in March.

The Institute for Supply Management-Chicago business barometer, which measures business activity in the Midwest, was 63.0. That was up from 55.9 in March, which was the lowest level since August, and topped the forecast of economists for a reading of 56.7.

MSCI’s all-country world index .MIWD00000PUS rose 0.11 percent to 413.50. In Europe, the pan-regional FTSEurofirst 300 .FTEU3 rebounded to close flat, up 0.03 point at 1,352.45.

The Dow Jones industrial average .DJI rose 14.93 points, or 0.09 percent, to 16,550.3. The SP 500 .SPX gained 1.27 points, or 0.07 percent, to 1,879.6, and the Nasdaq Composite .IXIC dropped 7.217 points, or 0.18 percent, to 4,096.326.

Twitter (TWTR.N) shares fell 10.8 percent to $38.00, after hitting a record low at $37.25, a day after the company’s quarterly results showed lackluster user and usage growth.

Oil fell below $108 a barrel with stocks in the United States at a record high on a steep increase in the Gulf Coast region and prospects for higher exports from Libya.

U.S. total commercial crude stocks rose 1.7 million barrels to just under 400 million barrels, the largest volume on records going back to August 1982.

Gulf coast oil stocks rose by 5.7 million barrels to just over 215 million, also their highest level on record.

Brent crude for June delivery was down $1.03 to $107.95 a barrel. June U.S. crude was down $1.73 at $99.55 a barrel.

The weak first-quarter read on the U.S. economy sent the dollar careening lower against the euro and the yen, bolstering the case for the Federal Reserve to maintain its zero-interest-rate policy.

U.S. short-term interest rate futures rose as traders pared bets the Fed would raise the federal funds rate in the first half of next year in the wake of the weak GDP report.

The June 2015 federal funds contract implied traders now see a 47 percent chance of a Fed rate hike at the end of June 2015, down from 53 percent at Tuesday’s close.

Inflation increased in the euro zone, albeit at a lower-than-expected pace, according to data on Wednesday. While the door is open for the European Central Bank to print money in a bid to boost economic activity, given that inflation is running below target, the data dampened slightly the expectation of any imminent action.

The euro was off an earlier three-week low to trade up 0.42 percent to $1.3869.

U.S. Treasury yields fell in choppy trading on the GDP data.

Yields on benchmark 10-year notes and 30-year bonds dropped to session lows.

The benchmark 10-year U.S. Treasury note was up 9/32 in price to yield 2.6604 percent.

(Reporting by Herbert Lash; Additional reporting by Marc Jones in London; Editing by Leslie Adler)

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Euro zone bonds reverse as inflation rises, takes heat off ECB

LONDON (Reuters) – Euro zone bond yields reversed earlier gains on Wednesday after euro zone inflation cooled expectations that the European Central Bank would need to immediately loosen monetary policy to support the bloc’s fledgling growth.

Consumer prices nudged above 2009 lows in April, although at 0.7 percent, inflation fell short of forecasts of 0.8 percent and remain well below the ECB’s target of just under 2 percent.

Markets had earlier been positioning for inflation to fall even further below forecast, after flash estimates for Germany – the bloc’s largest economy – released on Tuesday were 0.2 percent below economists’ predictions.

“Market expectations changed after the German reading. So today’s reading was actually at the higher end of what was expected,” said Luca Jellinek, European head of fixed income at Credit Agricole.

German Bund futures dipped to a day’s low of 144 after the data, down some 25bp on the day and erasing early gains. German bond yields rose 2 basis points to 1.52 percent, having hit 1.49 percent earlier, while Spanish and Italian equivalents rose 1 bps above day’s lows of 3.06 percent and 3.11 percent respectively.

While the threat of deflation keeps alive the chances of a more accommodative stance from the ECB, strategists say more evidence is needed to spur action.

“One set of data is not enough,” said Eric Oynoyan, Europe rates strategist at BNP Paribas. “If inflation falls back again, that will up the pressure.”

The ECB next meets on Thursday May 8, although few in the market predict any surprise policy action then.

However, ECB policymaker Christian Noyer added further fuel to the speculation by saying he was personally in favor of one or two further measures, for example injecting more liquidity.

Strategists say such measures are likely to include a further cut in official rates or an end to a process whereby the ECB drains euros from the banking system equal to its own holdings of government bonds bought at the height of the crisis, or sterilization of its Securities Markets Programme.

A programme of asset purchases, or quantitative easing, which the ECB has referenced as a possible tool, is also on the cards. Italian Economy Minister Pier Carlo Padoan reiterated on Tuesday, however, that the implementation of such a programme would prove difficult.

Immediate pressure on the ECB from money markets is expected to ease, with the euro zone overnight bank-to-bank lending rate tipped to fall from multi-year highs as 100 billion euros that was injected into the euro zone banking system on Tuesday filters through.


European market participants will now turn their attention to events in the US, seeking clues for when the world’s largest economy will raise rates, a move that is likely to be felt across continents.

Later on Wednesday, US Federal Reserve officials are not expected to deviate from continued tapering of its massive bond-buying stimulus at the end of its two-day meeting. Neither is it likely to provide any more guidance on rates rises, predict strategists, leaving ADP employment data as the key indicator.

“The Fed is on autopilot regarding tapering, thus the labor market data will be key regarding the market’s take on the timing of the first interest rate move,” said Commerzbank analyst Alexander Aldinger said.

(Editing by Larry kIng)

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Ryanair buys five more Boeing 737-800 planes

DUBLIN (Reuters) – Low cost carrier Ryanair (RYA.I) said on Wednesday it had agreed to buy five more Boeing (BA.N) 737-800 aircraft, taking its order book to 180 new Boeing planes worth over $16 billion.

Ryanair, Europe’s largest airline by passenger numbers, said four of the five planes would be delivered in the summer next year, with the fifth coming in Feb, 2016.

“Now that we have 4 more aircraft (21 in total) for summer 2015, Ryanair will offer more new routes and increased frequencies to more customers than ever before,” the firm said.

(Reporting by Neil Maidment; Editing by Mark Potter)

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UK lawmakers plan to probe Pfizer pursuit of AstraZeneca

LONDON (Reuters) – British lawmakers intend to investigate U.S. drugmaker Pfizer’s (PFE.N) planned $100 billion takeover of British rival AstraZeneca (AZN.L) in a bid to ensure scientific research and jobs are protected.

Members of the parliamentary business, innovation and skills committee are worried that the deal, which would be the biggest-ever foreign acquisition of a British company, could threaten the country’s strategic interests.

“We are keen to look closely at it,” committee member Ann McKechin told Reuters.

“We will see how events pan out over the next few days, but clearly given the scale of the proposed merger it is important that we consider the impact not just on shareholders but also on employees and the wider interests of the UK.”

AstraZeneca, Britain’s second-biggest drugmaker behind GlaxoSmithKline (GSK.L), is an important part of the life sciences sector and employs nearly 7,000 staff in the country.

The committee’s chairman Andrew Bailey said it would be looking to hold an inquiry “pretty quickly”, and those called to give evidence were likely to include ministers such as Business Secretary Vince Cable and representatives from the Treasury.

The British government has so far adopted a neutral stance on the matter, with finance minister George Osborne saying any deal between the two companies would be a commercial matter.

“The line that this is a straightforward commercial issue that the government has no role in is too laid back,” said Bailey. “In AstraZeneca we have a company that amounts to 2.3 percent of our total exports, is a world leader in research in pharmaceuticals and is very strategically positioned in this country.”

Committee member Katy Clark said Pfizer’s management would also probably be among those called to any inquiry.

Politicians are wary of foreign takeovers in the light of Kraft’s (KRFT.O) 2010 acquisition of Cadbury, when the U.S. food group promised to keep open a key factory, only to go back on the pledge soon after the deal was completed.

“The committee previously had a great deal of concern over the Cadbury takeover, so I think this is one we will really have to closely analyse what is on offer,” McKechin said.

Pfizer already has a tarnished reputation in Britain after it announced plans in 2011 to shut a major drug research site in Sandwich, southern England, where Viagra was invented, with the loss of nearly 2,000 jobs.

The U.S. firm says it views Britain as an attractive location for both pharmaceutical research and manufacturing – helped by recent government tax incentives – but cannot make any firm commitments on future investment or jobs.

Pfizer Chief Executive Ian Read is in Britain to lobby politicians and investors about the company’s plans. Despite the government’s neutral stance, behind the scenes officials are warning Pfizer against making draconian research job cuts, industry sources said.

Pfizer has made two approaches to AstraZeneca, both of which have been rebuffed. The company is widely expected to come back with a revised offer before a May 26 deadline for it to “put up or shut up” under UK takeover rules.

(Additional reporting by William James, Editing by David Holmes and Susan Fenton)

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