Pearson share price tanks as publisher warns on profits

Written by: Tsveta van Son
March 11, 2020

Pearson’s (LON:PSON) share price has posted a hefty fall in London this morning as the education publisher warned that its operating profit will come in at the bottom end of its guidance range. The update comes after the company posted a rise in six-month revenue back in July, signalling that its shift to digital was starting to pay off.

As of 08:57 BST, Pearson’s share price had given up 16.05 percent to 722.60p, significantly underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.56 percent higher at 7,330.96 points. The group’s shares have given up more than 16 percent of their value over the past year, as compared with about a 2.6-percent gain in the Footsie.

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Pearson warns on profits

Pearson said in a statement this morning that while it expects its revenue to stabilise this year, weaker-than-expected trading in the company’s  US Higher Education Courseware business during the key selling season means that the education publisher now expects its adjusted operating profit to come in at the bottom of its guidance range of between £590 million and £640 million. The company’s earnings per share are also expected to come in at the bottom of the guidance range of between 57.5p and 63.0p.

“The third quarter has been significantly weaker than we expected in US Higher Education Courseware,” Pearson’s chief executive John Fallon commented in the statement, adding, however, that the company still expects “revenue across Pearson as a whole to stabilise this year, with encouraging growth in many parts of the company”.

Analysts on FTSE 100 group

Liberum reaffirmed the blue-chip company as a ‘sell’ today, without specifying a target on the Pearson share price. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average valuation of 780p.