Can Pearson Re-Educate Any Sceptical Investors With FY Results?
Spreadex | Feb 15, 2019 12:05
Though it has to be put into the context of a godawful run between 2015 and 2017, the former FT-owner had a fantastic 2018 as it repeatedly reassured investors that its turnaround was on track. It did so well, in fact, that its rise from £7.31 back to £9.36 made it one of the FTSE 350’s top 10 best performing stocks of last year (remember, it was a tough one).
The company initially looked like it was going to carry on that form, hitting a fresh 3-year-plus high of £10.25 in mid-January. However, the firm’s first New Year update undid a decent chunk of investors’ goodwill, leaving Pearson PLC (LON:PSON) at a current trading price of £9.37.
On the surface, that aforementioned Q3 statement had plenty to cheer. Due to its aggressive cost saving plans, Pearson confirmed it was set to deliver adjusted operating profit of £540 million to £545 million, at the mid-to-upper end of its previous £520 million to £560 million guidance (but still a 6%-ish drop year-on-year). Adjusted earnings per share, meanwhile, are set to jump to 70p to 71p, a hefty improvement on the previous year’s 54.1p.
However, total underlying revenues fell 1%, the main issue being a 5% drop in its US Higher Education Courseware division, a worry given it makes up just shy of a quarter of the company’s overall sales.
In terms of Friday’s full year results, investors will be on the lookout for any change in its full year forecasts. Pearson is expecting adjusted operating profit of between £590 million to £640 million, alongside a 0% to 5% drop in US HECW revenue.
Pearson PLC(LON:PSON) has a consensus rating of ‘Hold’ alongside an average target price of £7.56.
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