Broker snap: Nomura expects subdued organic growth at Pearson

LONDON (ShareCast) - Nomura has maintained its reduce rating on Pearson (EUREX: PSOF.EX - news) , despite the publishing giant raising earnings guidance on Thursday. The group said that 2011's earnings per share should be in the region of 85.25p, up from 77.5p in 2010 and ahead of previous guidance of earnings of around 83p per share (market consensus: 83.12p). For the year as a whole Pearson generated around £2bn of digital revenues and about £600m of revenues in emerging markets. Meanwhile, its North American education division continues to grow market share amid weak market conditions. According to Nomura, "The organic growth rate we think is unlikely to much exceed 1% for FY11 (vs. our current 2% forecast), and tough conditions in North American education owing to budget shortages are likely to persist into 2012 and so organic growth in 2012 is likely to be flat to slightly down, in our view." The broker maintains its negative view on the stock, noting that the valuation is high at a price-to-earnings (FY12E) multiple of 14.6. A 1,130p target is kept. Despite the upgrade to guidance today, the market was underwhelmed with shares trading down 2.57% at 1,214p in mid-morning trade.