Company Reports

Pearson is the largest testing and education provider globally. All in all, Pearson does three things: creates learning materials, delivers them via digital and physical platforms, and verifies those skills through testing.

Pearson is the largest testing and education provider globally. All in all, Pearson does three things: creates learning materials, delivers them via digital and physical platforms, and verifies those skills through testing.

Pearson's underlying revenue expanded by 4% in the first half, in line with its mid-single-digit growth guidance. Management also confirmed operating profit guidance of GBP 640 million to GBP 685 million.

Pearson's underlying revenue expanded by 4% in the first quarter, in line with its guidance of mid-single-digit growth. Management also confirmed operating profit guidance of GBP 640 million-GBP 685 million.

Pearson is the largest testing and education provider globally. All in all, Pearson does three things: creates learning materials, delivers them via digital and physical platforms, and verifies those skills through testing.

Pearson reported underlying sales growth of 4% and adjusted operating profit growth of 6%. Management guides to mid-single-digit underlying sales growth in 2026 and the medium term, while still aiming to grow margins by 40 basis points annually.

Pearson reported underlying sales growth of 4% and adjusted operating profit of GBP 610 million-GBP 615 million. However, despite management confirming mid-single-digit underlying sales growth in the medium term, the loss of the US student assessment contract sent shares lower.

We are launching coverage of Pearson, the world's largest testing and education provider. All in all, it does three things: creates learning materials, delivers them via digital and physical platforms, and verifies those skills through testing.

Pearson is the largest testing and education provider globally. All in all, Pearson does three things: creates learning materials, delivers them via digital and physical platforms, and verifies those skills through testing.

We are dropping coverage of Pearson. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

The first half of the year has been mixed for narrow-moat Pearson. Organic revenue was up 6% and operating profit up 22% as a rebound in certain areas of the business, affected by lockdowns in 2021, saw a full, uninterrupted period of growth. With management’s guidance for the full year unchanged, we are comfortable with our forecasts for the period and reiterate our GBX 960 fair value estimate. We view the current share price as attractive.

Narrow-moat Pearson proffered up a decent first-quarter update, with organic revenue growth of 7% over the period. It seems the positive momentum achieved in full-year 2021 has spilled over into 2022, with management reaffirming guidance for the full year. We do not expect to make any material changes to our numbers on the back of this update and reiterate our GBX 960 fair value estimate. We view the current share price as attractive.

Over the past few years, Pearson has experienced almost the perfect storm of negative events: declining university enrolments, an uptick in rental in the higher education courseware market, a loss of testing contracts in the United States and a slowdown in emerging markets.

The news of a rejected bid by private equity giant Apollo sent narrow-moat Pearson shares soaring in afternoon trading on March 11, closing more than 20% up on the day. The offer, at GBX 854 per share represents levels not seen by investors since last summer, and correlates almost exactly with our GBX 870 fair value estimate, but undervalues the business, according to management.

Having essentially preannounced its full-year results last month, there was little in the way of surprises in the Feb. 25 release from narrow-moat Pearson. Underlying revenue was up 8% year over year and operating profit up closer to one third. With positive momentum in much of the business, investors should generally be pleased. We do not expect to make any immediate adjustments to our numbers on the back of this release, nor to our GBX 870 fair value estimate, we view the current share price as highly attractive.

Narrow-moat Pearson published a decent full-year trading update, with revenue up around 8% year over year and operating profit up closer to one third. Investors should take comfort in the positive momentum over 2021, but given the brevity of the Jan. 19 update, questions will remain about the direction of travel in the North American higher education courseware business, which has seen continued revenue declines for the last number of years as students shift away from higher-priced textbooks to digital courseware. Despite the uncertainty around the impact of this shift, we see enough in Pearson’s underlying business, supported by its strong ability to generate content and switching costs, to warrant taking a leap of faith. Relative to our GBX 870 fair value estimate, we view the current share price as highly attractive.

Narrow-moat Pearson’s nine-month trading update showed some positive signs of improvement, with underlying revenue up 10% year over year. Continued decline in the higher education courseware business appears to have spooked investors, however, with the share price down around 8% at the time of writing. Management is blaming a decline in college enrollments, partly as a result of the strengthening of the labor market. While this is certainly plausible, it comes at a time when investors are already skeptical about the shift from textbooks to a digital subscription model with a much lower price point. Ultimately, however, we believe that this is simply the direction the education industry is moving. Pearson will have no choice but to embrace the model and hope that increased penetration and the disintermediation of the secondary market will be enough to offset lower price points. Having already penned in revenue declines of around 7% in this area, we are still relatively comfortable with the direction of travel so far this year. We reiterate our GBX 870 fair value estimate, and see a renewed opportunity in this stock following recent share price declines.

Over the past few years, Pearson has experienced almost the perfect storm of negative events: declining university enrolments, an uptick in rental in the higher education courseware market, a loss of testing contracts in the United States, a slowdown in emerging markets, and benign growth in K-12 educational spending.

Almost spookily, narrow-moat Pearson’s revenue rose by 17% in the first half of the year, the exact quantum by which it fell in the first half of 2020. Operating profit swung back into the black, following the loss posted at this point last year. No changes to full-year 2021 guidance, but management have stated that they expect operating profit to be in line with market expectations, something that should reassure investors, given the numerous profit warnings posted by the company in recent years. We did not see anything in the release to change our view on the stock, and reiterate our GBX 870 fair value estimate. With the shares having almost doubled off their March 2020 lows, we see only modest upside with the name.

Narrow-moat Pearson has started the year well, with organic revenue rising by 5% year over year in the first quarter, despite still difficult market conditions. The company has reiterated its full-year guidance, which despite having only been issued at the beginning of March, we still take as a positive sign given the highly uncertain economic environment. We maintain our forecasts and GBX 870 fair value estimate. We believe the shares offer only modest upside from here.