Results Following Pearson's Wet N' Wild 2017
Spreadex | Feb 16, 2018 12:54
The media firm certainly had a wet n’ wild 2017: less than 3 weeks into the year the stock had plunged 29%, sent lower after issuing its 4th profit warning in 5 years while announcing it was offloading a stake in Penguin Random House.
From there Pearson was gapping all over the place, both up (following May’s AGM, where it announced it might sell its US business, and October’s interim statement, as it upgraded its profit guidance) and down (in mid-July, as it shifted a slice of its Penguin stake). All this eventually led Pearson to close out 2017 at £7.41 – still a 9.6% decline year-on-year, but a significant improvement on the sub-£5.75 lows struck in January and September.
The company hasn’t quite been able to keep on this upwards trend in 2018, however. Though not quite as dramatic as the same time the year previous, January’s update wasn’t exactly greeted with much cheer by investors, the stock falling 4% after the release. Pearson PLC now sits at a current trading price of £6.86.
Once again the main issue was the company’s US arm. Weak textbook sales and ‘cautious buying behaviour’ due to lower enrolment in US colleges and the prevalence of open educational resources caused a 4% drop in the division’s revenue, leading to a 2% decline in total underlying revenue for the 9 months to the end of 2017.
However it wasn’t all bad news. Pearson revealed it expects adjusted operating profit will come in at the top end of the expectations, between £600 million and £605 million against the previously stated £576 million to £606 million.
In terms of Friday’s annual results, the reaction will likely be dictated by how high it adjusted operating profit figure actually is, alongside whether or not it can avoid another bearish note on its US business.
Pearson PLC (LON:PSON) has a consensus rating of ‘Hold’ alongside an average target price of £6.66.
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