Pearson Plc: Bullish on Q3 Earnings Beat and Favorable Q4 Outlook; Rating Upgrade to "Buy"

Pearson has been upgraded to a "Buy" rating due to its strong Q3 performance and favorable Q4 expectations. The company's better-than-expected metrics and positive guidance support a bullish outlook. The upgrade is based on Pearson's potential for further acquisition-led growth and its ability to continue delivering solid results.

Pearson plc (PSO) has been upgraded to a "Buy" rating by analysts, driven by its robust Q3 performance and favorable expectations for the remainder of the year. The company's better-than-expected metrics and positive guidance support a bullish outlook, contributing to the upgrade.

In Q3 2025, Pearson reported accelerating growth with underlying Group sales up by 4%, bringing nine-month growth to 2%. Management expects stronger Q4 sales growth and continues to target 2025 outcomes in line with market expectations. Performance by segment in Q3 included Assessment & Qualifications rising 4% as Pearson VUE returned to growth, Virtual Learning increasing 17% on 13% enrolment gains for the 2025/26 year, Higher Education declining 1% overall with US Higher Education up 2%, English Language Learning growing 1% on strong PTE demand, and Enterprise Learning & Skills advancing 2% with momentum in Enterprise Solutions [6-K] PEARSON PLC Current Report (Foreign Issuer)^[1].

Pearson's guidance for 2025 includes underlying sales growth and adjusted operating profit in line with expectations, with an updated adjusted operating profit of approximately £606m given an implied FX rate of £:$1.33. The company also expects adjusted net finance costs of about £65m, an effective tax rate of 24%-25%, and free cash flow conversion of 90%-100%, plus the £0.1bn State Aid repayment received in Q1 2025 [6-K] PEARSON PLC Current Report (Foreign Issuer)^[1].

Recent strategic actions include enterprise partnerships with Cognizant and Deloitte, an exclusive multi-year Salesforce certifications collaboration, and expanded AI learning tools. These initiatives are expected to drive further growth and solidify Pearson's position in the market.

The upgrade is based on Pearson's potential for further acquisition-led growth and its ability to continue delivering solid results. Analysts remain neutral on the equity research outlook for Q3, citing the acceleration in growth and the impact of foreign exchange rates on profit translation [6-K] PEARSON PLC Current Report (Foreign Issuer)^[1].