FTSE 100 movers: Pearson rallies on MS upgrade; Astrazeneca slips

London’s FTSE 100 was up 1.7% to 7,104.06 in afternoon trade as the weaker pound helped to boost exporters.

Education publisher Pearson got a boost on Tuesday as Morgan Stanley reiterated its ‘overweight’ rating on the stock and 1,050p price target, saying the market’s expectations of another profit warning are unlikely to materialise.

MS said the stock is too cheap, now down 25% from its highs and with a 2018 free cash flow yield of about 10% versus a price-to-earnings of 10x.

It added that Pearson shares are the worst-performing large dollar earnings in the UK post the Brexit vote.

It said the shares have fallen since the first-half results on worries that lower H1 gross sales and higher returns in the US college business will lead it to miss its 2016 guidance of pre-restructuring cost EBITA of £580m-£620m, to abandon its 2018 £800m EBITA target and to cut its thinly covered dividend.

Intertek was lifted by a double upgrade from Jefferies, which raised its stance on the stock to ‘buy’ from ‘underperform’ and lifted the price target to 4,300p from 3,000p.

“Our recommendation is not predicated on a major near term beat. More, that we believe we should see from here a steady on-going improvement in a range of metrics, including organic growth, margins and free cash flow,” the bank said.

Jefferies said its analysis of margin levels provides a strong case for profit growth faster than revenues, while strong FCF allows it to formally model M&A.

On the downside, pharmaceutical giant Astrazeneca was on the back foot after it said its Brilinta drug did not meet the end point of a clinical trial.

Brilinta, which is already approved as a post-heart attack medicine, failed to meet the targeted results in a massive trial among patients suffering from symptomatic peripheral artery disease (PAD).

It wasn’t all bad news, however, as the company said it had made a win with the NHS drug regulator for one of its big cancer drugs and announced a licence deal for a beta-blocker medicine.

Risers

Provident Financial (PFG) 3,325.00p 6.84%
Pearson (PSON) 799.50p 4.78%
Intertek Group (ITRK) 3,700.00p 4.46%
CRH (CRH) 2,678.00p 3.76%
Micro Focus International (MCRO) 2,281.00p 3.49%
Persimmon (PSN) 1,883.00p 3.40%
Johnson Matthey (JMAT) 3,474.00p 3.02%
Royal Dutch Shell 'B' (RDSB) 2,104.00p 2.94%
Rolls-Royce Holdings (RR.) 758.50p 2.85%
Mondi (MNDI) 1,695.00p 2.79%

Fallers

Mediclinic International (MDC) 914.00p -1.08%
Fresnillo (FRES) 1,819.00p -0.44%
easyJet (EZJ) 1,003.00p -0.30%
Randgold Resources Ltd. (RRS) 7,775.00p -0.19%
Polymetal International (POLY) 970.00p -0.15%
Capita (CPI) 667.50p -0.07%
United Utilities Group (UU.) 1,000.00p 0.00%
Land Securities Group (LAND) 1,058.00p 0.00%
SABMiller (SAB) 4,496.00p 0.02%
AstraZeneca (AZN) 5,053.00p 0.24%