Pearson lifts annual guidance and initiates £300 million share buyback

  • Stock Market News
Pearson lifts annual guidance and initiates £300 million share buyback
Credit: © Reuters.

FTSE 100-listed Pearson has revised its adjusted operating profit forecast upwards to £570-£575 million, expecting total revenue growth to be at the upper end of the low to mid-single digit range. This excludes the Strategic Review businesses. The announcement came on Monday, following a period of robust performance in the first three quarters of 2021.

The firm reported a 5% increase in underlying revenue for the first three quarters of 2021, not including their online program management branch. Driving this growth were the company's Assessment and Qualifications and English Language Learning divisions, which saw sales growth of 8% and 34% respectively.

However, not all divisions saw such positive results. Pearson's Higher Education division experienced a 5% decline in sales, attributed to the pricing mix effect and a shift in revenue recognition into Q4 due to product Pearson+ expansion. Furthermore, Virtual Learning revenue took a hit with a plunge of 20%, primarily resulting from an 81% reduction in online program management income following the termination of the ASU contract.

In response to these results, Pearson launched a £300 million share buyback operation. By the end of October, the firm had already repurchased £115 million worth of shares. This move signals confidence in the company's financial health and future prospects.

InvestingPro Insights

Based on real-time data from InvestingPro, Pearson (PSON (LON: PSON )) has a market capitalization of 7941.7M USD and a P/E ratio of 22.95, indicating a high valuation relative to its earnings. The company's revenue for the last twelve months as of Q2 2023 is 4993.46M USD, with a quarterly growth of 5.09% in Q2 2023.

InvestingPro Tips suggest that Pearson has high earnings quality, with its free cash flow exceeding net income. The company has consistently increased its earnings per share and has maintained dividend payments for 32 consecutive years, demonstrating its financial strength and commitment to returning value to shareholders. Despite recent slowdowns in revenue growth, the company's liquid assets exceed its short-term obligations, and it operates with a moderate level of debt, indicating a strong financial position.

For more insights and tips, consider subscribing to InvestingPro's premium service, which offers additional tips on a variety of stocks. Currently, there are 10 additional tips available for Pearson. Check them out here.

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