Pearson upgraded by Exane

Market Report

Publishing group Pearson has announced it is to sell the Financial Times Group to Japanese media firm Nikkei for £844m in cash.

Investors who dumped Pearson in recent weeks should pile back in. That’s the view of analysts at Exane BNP Paribas, who upgraded the publishing-turned-education group to “outperform” yesterday, claiming that it had been oversold by panicky shareholders since a profits warning in October.

“Risks of further earnings pressure in 2016 are real but seem discounted in an all-time low relative valuation,” said Exane’s Sami Kassab, adding that the going should get easier in 2016. He urged clients to buy the stock for a return to growth and a stable dividend.

Traders had picked out Pearson as the next blue-chip company most likely to slash its dividend, following in the footsteps of eight other Footsie firms, most recently the struggling miner Anglo American.

However, the upgrade helped Pearson, which sold the Financial Times Group for £844m shortly before cutting its guidance, to close 36.5p higher at 743.5p.

It was no surprise that trading volumes were lower than normal as investors sat on the sidelines awaiting the US Federal Reserve’s decision on whether to raise interest rates. However, the FTSE 100 finished 43.4 points higher at 6,061.19.

One of those dividend-cutters, the Asia-focused bank Standard Chartered, was the biggest Footsie riser, climbing 30.7p to 512.7p as broker JPMorgan stood by its “outperform” recommendation and bullish 870p target price.

On the mid-cap FTSE 250 index, Bonmarché’s profits warning sparked a rush for the exits at rival fashion retailer N Brown, whose shares fell 19.4p to 301.7p, and Debenhams department stores, which ended 2.65p down at 73.3p.

Citigroup’s double upgrade from “sell” to “buy” on the online betting firm Bwin.Party encouraged punters to have a flutter, lifting the shares by 7.7p to 124.4p. The broker said GVC’s reverse takeover of Bwin “should drive multiple upsides” and it also gave the Aim-listed firm a glowing write-up, helping it up 26p to 441p.

Results from Elegant Hotels, which floated on Aim in May, impressed and its shares rose 3.5p to 115.5p.

Shale gas explorer IGas put on 4.5p to 20.38p after laws on fracking in national parks were loosened.