Pearson Top of the Class in Textbook Performance; MARKET REPORT

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Byline: MICKEY CLARK

GOOD times lie ahead at publisher Pearson if it follows the advice of a big City hitter.

US broker Morgan Stanley has upgraded it from equalweight to overweight and lifted its target from 720p to 800p. That could grow to 950p if the group decides to sell prize assets such as the Financial Times and FT.com, returns [pounds sterling]1.75 billion to investors and brings its substandard margins of 11.8% into line with the industry norm of 17%.

MS describes trading as strong, buoyed by positive trends in US schools and higher education, where it publishes textbooks.

There are also signs of recovery at Penguin Books and the FT. As a result, it has pencilled in three years of double-digit earnings growth and improving cashflow and returns.

The shares today climbed 261/2p to 713p, making them one of the best performers in the Footsie.

Investors appeared to put this week's high drama in Tokyo firmly behind them as they chased share prices in London back above the 5700 level. The expiry of the January series of options and futures passed without a hitch and the FTSE 100 index rose 27.6 to 5720.8.

Shire Pharmaceuticals extended this week's lead with a rise of 681/2p to 9031/2p after settling its legal dispute with generic rival Impax over its treatment for attention deficit disorder, Adderall XR.

Impax will now be permitted to market a generic version by January 2010 but must pay Shire a royalty from any sales of it. It also means Impax has secured the right to enter the market as Shire's authorised generic. In return, Impax will promote Carbatrol, Shire's treatment for epilepsy in the US, in return for payments on current sales.

BT fell 43/4p to 2041/2p, on the threat of competition from supermarket giant Tesco, up 4p at 3171/4p, which is launching its own broadband telephone business. Broker Seymour Pierce has kept BT at outperform. Vodafone retreated 11/4p to 120p ahead of a trading update.

Lloyds TSB marked time at 516p.

The shares were chased sharply higher yesterday, with more than 60 million changing hands in the belief that the Sage of Omaha, Warren Buffett, was attempting to buy a stake. There has been a lot of bid talk in the sector, but some brokers say the shares are being bought ahead of the full-year dividend reporting season which gets under way soon. …