Broker snap: Strong earnings momentum for Pearson

25th Oct 2010 13:21

Investment house Killik sees strong earnings momentum for publishing and education group Pearson after the group lifted its full-year guidance in the third quarter."Although the end of the year is the key selling season in education and consumer publishing, and both businesses face tough comparables in the fourth quarter, the group now expects adjusted earnings per share to be approximately 10% ahead of last year, implying 72p versus previous guidance of 70p", the broker said. During the first nine months of the year, the group increased sales by 7% and adjusted operating profit by 15%.The group saw an underlying sales growth of 5% in Penguin, 5% in Education and 8% at the Financial Times, as all parts of the company continued to perform strongly."A long-term process of investment is expected to leave the group with strong market positions and well placed to benefit from a shift to services and developing economies," said Jonathan Jackson, head of Equities at Killik."We believe spending on education remains a key priority for every administration and this, combined with the group's strong market position (especially in testing and technology), leaves Pearson well placed at a time when its financially-stretched competitors are struggling to invest", the broker added.The target price for Pearson is 976p.