This is why FTSE 100 stock Pearson’s share price is rocketing!

The Pearson share price has just leapt to 16-month highs! Here’s why the FTSE 100 giant has rocketed following fresh trading numbers.

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The Pearson (LSE: PSON) share price has been mighty buoyant in Wednesday trade. The educational materials specialist was 7% higher from last night’s close, thanks to a positive reception to fresh financials.

At 726p per share, Pearson is now at its most expensive since September 2019. Here’s what the FTSE 100 share had to say for itself.

Sales fall by double digits

Pearson said group sales dropped 10% during 2020, slightly better than what the market had been expecting. As a consequence, it said that full-year adjusted operating profit would range between £310m and £315m. This was bang in line with City consensus.

The UK share said the impact of Covid-19 “has been felt most acutely across International and Global Assessment due to test centre and school closures, exam cancellations, reduced global mobility and international economic pressure on spending.”

It added that the pandemic had hastened demand for digital learning, a phenomenon which resulted in a “strong” performance for its Global Online Learning division. Sales here soared 18% in 2020, thanks to strong enrolment numbers at new and existing virtual schools.

It added that sales growth had been good at its Online Program Management arm which supports higher education.

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Strength across its digital operations was offset by significant weakness across its other divisions however. Revenues from its Global Assessment unit tanked 14% in 2020 as test centres and schools were closed. And North American Courseware turnover dropped 13% as higher-priced package and print sales kept declining.

Meanwhile, International sales plummeted 19% due to “school and test centre closures and the continuing impact of Covid-19 on public and private spending on courseware and assessments.

In other news, Pearson said ongoing restructuring resulted in cost savings of £60m in 2020. It’s on course for a further £50m worth of savings this year too, it said. Net debt in 2020, meanwhile, came in around £100m better than the market had been expecting, at £500m.

A bright future for Pearson?

Andy Bird, chief executive of Pearson, commented that “despite facing significant uncertainty, our teams have been laser-focused on closing out 2020, enabling us to report sales and profit for 2020 in line with expectations.” 

He added: “Uncertainty remains in the near term as a result of the ongoing pandemic, with further lockdowns, exam cancellations and reduced global mobility.”

In brighter news, Bird added he is “excited” about the company’s future as online learning takes off. He pointed to several key hires which the FTSE 100 company made towards the end of 2020 “to accelerate our digital growth.”

And Pearson’s chief exec affirmed plans to move to a more consumer-focussed approach, one that “[targets] the incredible opportunity that exists to have a direct relationship with millions of lifelong learners.

City analysts reckon Pearson will enjoy a 47% earnings increase in 2021. They predict annual profits will rise 10% the following year too. On current projections, this UK share trades on a forward price-to-earnings (P/E) ratio of around 19 times.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Pearson. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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