Pearson raises 2011 earnings guidance

London - British publisher Pearson has raised 2011 earnings guidance for the third time in three months after a strong year-end season, saying it now expects 10% growth in adjusted earnings per share (EPS).

The new guidance from Pearson, which owns the world’s biggest education technology business, the Financial Times and Penguin books, implied EPS of 85.25 pence. It had previously guided to EPS of 83p, up from 77.5p in 2010.

Pearson said it continued to benefit from rapid growth in digital services and investment in developing economies, towards which it has shifted its portfolio by divesting non-core assets in legacy businesses such as financial services.

“In the context of significant structural industry change and generally weak market conditions, Pearson performed well competitively through the important year-end selling season,” it said on Thursday.
 
“The group has finished the year well, in our view benefiting from sustained investment against overleveraged and distracted rivals,” Numis analysts said in a note.

Competitors are lining up to challenge Pearson’s leadership in the structurally strong international education market in which the company has few global rivals, with McGraw-Hill its most significant competitor in North America.

However, media group News Corp has signalled it plans to enter the market in earnest, and consumer electronics maker Apple was due to announce its own plans in education on Thursday.

“This could well be a positive catalyst should Apple announce steps to widen usage of technology in education, in partnership with content providers like Pearson,” UBS analyst Alastair Reid said in a note.

“Increasing focus on Pearson’s position as leading player in a global structural growth industry will drive further share price strength.”

Pearson said the recent sale of its 50% stake in FTSE International financial index compiler to the London Stock Exchange for £450m ($693m) gave it headroom for further acquisitions.

It has bought several education technology companies and schools in China, India and other fast-growing markets in the past year.

The company said about $3bn of its 2011 revenues came from digital businesses and about $1bn from emerging markets, adding up to almost half total expected sales.

Pearson said it had continued to gain market share in its key North American education business. At the FT Group growth was driven by digital subscriptions, while Penguin had proved resilient over the key Christmas season, it said.