Pearson Predicts Earnings of 84.9 Pence per Share

LONDON -- The shares of Pearson (ISE: PSON.L) advanced 4 pence to 1,223 pence in early London trade this morning after the media conglomerate said it expected to report adjusted earnings of 84.9 pence per share for 2012.

The FTSE 100 member added that the projection would be broadly in line with the consensus of current market expectations. Pearson's chief executive, Marjorie Scardino, said:

We have confidently reiterated our guidance because many of our businesses are going strong in this complicated trading environment. But the dynamics of the markets we're in could make that achievement more about resilience than flamboyance. As always, all the people in Pearson have their shoulders to the wheels that turn in our important fourth quarter.

The earnings guidance accompanied a third-quarter update in which Pearson revealed that turnover had improved by 5% during the first nine months of the year. Highlights included the group's educational publishing division, where sales gained 7%, and the Financial Times subsidiary, where revenue also rallied by 7%.

In a separate announcement this morning, Pearson confirmed plans to merge its Penguin book-publishing operation with the Random House division of Bertelsmann. Pearson will own 47% of the joint venture, which last year would have generated profits of 261 million pounds and will be named Penguin Random House. Commenting on the deal, Scardino said:

This combination with Random House -- a company with an almost perfect match of Penguin's culture, standards and commitment to publishing excellence -- will greatly enhance [Penguin's] fortunes and its opportunities. Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers.

Based on today's earnings confirmation, Pearson's shares trade at about 14 times profits. Assuming the City's 43.5 pence-per-share dividend projection is accurate as well, the potential yield is 3.6%.

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