Shares in Pearson (LON:PSON) have fallen into the red this Monday as Berenberg weighed in on the blue-chip publisher, arguing that the company was ‘far from a turnaround,’ Sharecast has reported. The comments follow the FTSE 100 group’s full-year results on Friday when the company revealed a fall in sales, while reassuring investors that it expected its sales to stabilise this year and grow again next year and beyond.
As of 13:38 GMT, Pearson’s share price had given up 4.50 percent to 862.40p. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index having inched 0.02 percent up to 7,179.66 points.
Berenberg Bank weighs in on Pearson
Berenberg Bank reaffirmed Pearson as a ‘sell’ with a price target of 600p on the shares. Sharecast quoted the broker as commenting that it was cutting its estimates to reflect the sale of the group’s K12 business, the FX deterioration versus the basis on which guidance was set and the profitability of the US education business being notably below the expectations for last year.
"We believe Pearson is far from a turnaround, given the high operating leverage at its US higher education courseware business, which faces major structural and countercyclical headwind,” Berenberg pointed out, adding that while the numbers may be sustained by cost savings in the short term, “as early as next year, savings will be neutralised by general cost inflation, and we therefore expect profits to decline in 2020 versus 2019”.
Other analysts on FTSE 100 publisher
Deutsche Bank also reaffirmed Pearson as a ‘sell’ today, valuing the shares at 650p. According to MarketBeat, the blue-chip publisher currently has a consensus ‘hold’ rating and an average price target of 757.58p.