What happened
Pearson plc (PSO +1.29%) stock climbed 14% in October according to data provided by S&P Global Market Intelligence. Shares gained ground after the company delivered solid third-quarter results and raised its full-year profit outlook.
Image source: Pearson.
So what?
Pearson reported nine-month earnings on October 17, and shares climbed on an improved full-year profit outlook and growth for the company's digital business. The Britain-based education company now expects operating profits for fiscal 2017 to come in between 576 million pounds and 606 million pounds -- up from its previous estimate of between 546 million pounds and 606 million pounds.
Sales for the nine-month period increased 4% year over year but were down 3% on a constant currency basis as a result of soft demand for course materials in the U.S. market. While American courseware revenues slipped 1% across the stretch, digital revenues for the period increased 11% year over year, and the company signed 195 new contracts for its direct digital access program.
Now what?
The education company is in the process of simplifying its business and refocusing on its most profitable products and markets in order to adapt to industry pressures. In the medium term, Pearson sees continued headwinds in the American market (its most important geographic segment) stemming from lower higher-education enrollment and growth for secondhand sales. The results of the company's ongoing shift to digital will be a crucial point to watch as print-based sales appear to be on track for continued declines.
