Citi opens ‘positive catalyst watch’ on Pearson ahead of H1 results

Citi said on Wednesday that it was opening a "positive catalyst watch" on educational publisher Pearson as it thinks the first-half results at the end of July will act as a positive catalyst.

"Central to our view is: (a) the prospect of a 1H beat on adjusted operating profit which is a function of the progressive mix shift toward A&Q; (b) the potential for an upgrade to FY guidance and, with that, an upgrade to FY consensus earnings supported by our contention that there is still circa £60m of 'missing profit' from the pandemic; and (c) a view that the buyback will begin after the 1H results and by September at the latest," it said.

It added that with Pearson's shares down 11% year-to-date - underperforming the UK market by 11% and defensive growth peers like Relx and Informa by 20%-27% - and the group on just 13.5x prospective price-to-earnings, the risk/reward "tilts positively".

At 1030 BST, the shares were up 1.9% at 834.11p.