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Can Pearson Recapture Initial 2018 Mojo With Q3 Update?

Published 16/10/2018, 10:58
Updated 21/10/2020, 09:15

It looked like the former FT-owner was firmly in recovery mode during the first half of the year. From an opening price of £7.42, the company managed to rise back above £9 by mid-May, even briefly spiking to a 2 year peak of £9.74 following its interim results – more on those below – at the end of July.

Pearson PLC

Yet since then that initial enthusiasm has been sapped from the stock. Though it had fallen at the across much of September, the losses gathered pace as October got underway, the wider macro-woes combing with a serious of ‘Sell’ rating reiterations from the likes of Deutsche Bank (DE:DBKGn), Berenberg and Liberum Capital. Having hit a 5 and a half month low of £7.66, Pearson now sits at a current trading price of £8.15.

While it has found itself in a sticky patch in the last couple of months, July’s aforementioned interim statement was promising in terms of its turnaround. Though overall revenue fell 10% to £1.865 billion due to the firm’s various asset sales, on an underlying basis revenue was up 2%, boosted by gradual shift towards digital technology like online textbooks.

More importantly, pre-tax profit came in at £202 million against the £10 million loss seen in H1 2017. And while that huge improvement is down to selling off businesses, its underlying adjusted operating profit still rose 46%.

Heading into Wednesday’s nine-month trading update and, given the larger slice of the company’s annual profit comes in the second half of the year, investors will want to hear that Pearson has continued to move in the right direction in Q3.

Pearson PLC (LON:PSON) has a consensus rating of ‘Hold’ alongside an average target price of £7.22.

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