Friday newspaper share tips: Chemring, Pearson

For a manufacturer of devices to protect from improvised explosive devices, Chemring has been running into too many 'unknown' negative factors of late for comfort.

For starters, the company itself admitted that the oil price drop and its impact on the budgets of its oil-producing clients was a source of uncertainty.

On top of that, at the start of the year it has suffered from two unrelated manufacturing issues.

True, the unknowns have sometimes been for the better, such as a recent large order received from an unidentified Middle Eastern customer for 40mm ammunition.

As well, the US defence budget points to stability an even a possible uptick in spending.

The company, well-known for the countermeasures kits for aircraft it produces, had also recently carried out a rights-issue which will allow it to halve its debt and all of its three divisions were in positive territory.

Management was confident of making up lost ground too, but markets have been wrong too frequently in the past when it came to identifying all the negatives out there, The Times's Tempus said.

"I would not be inclined to extend the benefit of the doubt," Tempus added, as it recommended that investors "avoid" the stock.

Pearson's pledge to maintain its dividend payment soothed shareholders but the fact that it sold the "family silver" to reduce debt was a poor omen, The Daily Telegraph's Questor said.

Mostly under the stewardship of Marjorie Scardino, FTSE-listed Pearson ran up a pile of debt after splashing out more than $4.2bn to pay for acquisitions over a six-year period from 2007 onwards.

Rival Relx did the opposite, offloading Harcourt in 2007 and its stock price had gone up by over 60% since then.

Furthermore, the balance sheet might still be in trouble when the value placed on many acquisitions was reviewed.

Indeed, its brand might have become so tainted that the media outfit could struggle to win new clients, according to research from Liberum cited by the tipster.

A drop in the number of US college enrollments held the potential to turn into another headache for investors.

The shares were yielding 7% on a prospective basis, but Questor recommended its readers not chase the stock - quite the opposite, it wss "time to sell".