Disappointing results from Pearson rival bode badly, says Liberum

Liberum reiterated its 'sell' rating on education publisher Pearson on Wednesday, saying that disappointing second-quarter results from Barnes & Noble Education in the US provide warning signs.

Shares in Barnes & Noble Education tanked on Tuesday after the company's second-quarter numbers fell short of analysts' expectations.

Liberum said that as one of the largest US higher education college bookstore chains, its numbers give a good read-across to Pearson's US higher education business, which the brokerage reckons is at least 35% of profits and its main structural concern on the company.

"Comments about worsening price deflation in textbook sales and evidence of higher returns should send a particular alarm warning about Q4 US Higher Ed textbook trends," it said.

Comparable second-quarter textbook sales at BNED fell 8.1%, which was worse than the company expected, while the wholesale textbook distribution business, MBS, saw sales fall 10% year-on-year.

Analyst Ian Whittaker said the results point to a weaker fourth quarter in the higher education market, and more crucially, signal that returns could be worse than expected, which would put pressure on Pearson's guidance.

At 1540 GMT, the shares were down 3.3% to 929p.