Financial Market Research and Analysis

Our analysts have their fingers on the pulse of the world's financial market news.

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Pearson loves cheaper pound
Energy and miners dragged the FTSE lower at the open. Royal Dutch Shell (-1.46%), BP (-0.80%), Rio Tinto (-0.83%), BHP Billiton (-1.52%) are among the leading losers.

Pearson (-2.27%) surprisingly announced a positive earnings report in the second quarter, yet failed to trigger optimism following the results. While the restructuring costs continue weighing on profits, the company anticipates to cash in between 580 and 620 million pounds in adjusted operating profit (before restructuring costs) in 2016.

The positive surprise has something to do with a cheaper pound and a further depreciation in pound could boost activity in the future. The company stated that ‘FX profits from the stronger US dollar versus the pound, partially offset weakness in main emerging market currencies’. Although the business conditions in major markets remain challenging, with lower revenue forecasts from the US and the UK markets, Pearson kept its 2016 outlook unchanged. Pearson is experiencing a hard time gaining back investors’ appetite since the sale of its popular Financial Times unit. Only 43% of brokers remain on the buy side, 30% prefer holding the stock for the moment, while a significant 25% are seller with an average twelve-month price target of 904.7p, approximately 6% lower than the current price.

IAG (-2.42%) missed estimates in the second quarter. The challenging business environment for airline companies is a developing story. IAG drastically lowered its earnings target due to Britain’s decision to quit the European Union. UK’s travel and leisure businesses are expected to underperform on looming uncertainties on Brexit.

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