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Credit Suisse ups target price on 'confident' Pearson
With Pearson's management showing signs of increasing confidence as the first quarter drew to a close, analysts at Credit Suisse saw reason to believe that the FTSE 100 educational publisher can deliver stronger earnings this year than first envisaged.
In a conference call with management, confidence was especially apparent over the North American higher education market, with chief executive John Fallon going so far as to highlight Pearson's "very good competitive performance" in the higher education adoption season, which lasts until mid-June.
Fallon said he was "very comfortable" with the way the company was performing as he talked about "doing exceptionally well" in the sell-through of Pearson products in colleges taking Digital Direct Access, which has the additional benefit of reducing demand for Open Educational Resources in those colleges.
"To us, this suggests that the company is not concerned about the potential impact of the Cengage Unlimited competing product line," Credit Suisse said in its Wednesday note.
For both Pearson's growth and core divisions, the outlook for modest growth was reiterated by management, but CS did note that, as the first quarter was a shorter trading period, it was "hard to extrapolate the trends" moving forward.
CS maintained its 'neutral' rating on Pearson and upped its price target on the group from 700p to 850p.