Market report: Pearson struggles as US students rent textbooks

Another blow was dealt to Pearson’s recovery today as more signs of a weak college textbook market sent investors packing.

The education publisher’s shares dropped 17p, or 2.1%, to 776p, on the back of gloomy financial results from Barnes & Noble Education, one of the biggest university bookstore operators in the US, Pearson’s main market.

Its shares tumbled 14% on Wall Street yesterday as it warned that students were counting the pennies and not splashing out on expensive textbooks, choosing instead to rent them.

Analysts at Liberum fear Pearson, which sold the Financial Times Group and its stake in The Economist to focus on US education, is “over-exposed” to the American college scene, where it generates almost half of its profits.

“We see the biggest pressure there coming from students looking for cheaper options to buying textbooks, which can often be in the $150-$200+ price range,” said analyst Ian Whittaker.

“A key driver of the problems Pearson has faced appears to be the rise of textbook rentals, which — as Barnes & Noble Education stated — is becoming the preferred choice for many students.”

Pearson was among the blue-chip losers on a day when the FTSE 100 rose 79.59 points, or 1.2%, to 6859.43, boosted by mining stocks.

Among them was Rio Tinto, which was 127.5p higher at 3149p as investors sought beneficiaries of higher copper prices.

They were also encouraged by an upgrade to outperform by Credit Suisse and comments made by Rio’s copper boss that the company expects a global copper shortage in 2020 when its giant Oyu Tolgoi mine in Mongolia is expected to start producing.

Bargain-hunters picked up shares in the spreadbetters after yesterday’s painful falls caused by the FCA’s review.

Although still a long way below Monday’s trading levels, IG Group clawed back 6.9p to 492p and CMC Markets was up 3.42p at 118.42p.

Plus500 saw no dead cat bounce, slipping 2.5p further to 364p, as it emerged Odey Asset Management took advantage of the fall to lift its stake to 21%. Crispin Odey’s hedge fund was also betting against IG’s shares.

At the smaller end of the scale, nuclear engineer Redhall Group, which is hoping to be picked to build blast-proof doors for Hinkley Point C, improved 0.4p to 8.9p as it trimmed annual losses to £1.1 million with a healthy order book. Underlying profits were slightly ahead of analyst forecasts.

Alternative lender Private & Commercial Finance was granted its banking licence, sending the shares up 1.2p to 30.2p.