In May 2014, I wrote a post about Pearson's February 2014 earnings call, in which Pearson CEO John Fallon spoke with market analysts about Pearson's education investments.
Here is an excerpt from that post:
One of the analysts (Whittaker) raises the question of Pearson's dependence upon 2015 CCSS implementation for future profits. Fallon uses editorials on CCSS as evidence that CCSS will move forward (such sophisticated research, eh?) and comments that before CCSS, "local, stand-alone operating companies" were an impediment to not being able to "scale at anything." ...
Whittaker has asked once about an alternate plan of action if CCSS doesn't work as anticipated. Fallon responded initially that all of CCSS need not work in 2015, just some of CCSS. Whittaker insists upon hearing of Fallon's alternate plan of action; Fallon offers no substantive alternate plan. [Emphasis added.]
Now, cut to June 30, 2015, and an article in the UK Telegraph regarding financial advice from UK-based market research firm, Questor entitled, Questor Share Tips: Sell Pearson on US Education Weakness.
Sell Pearson??
Uh-oh...
Some excerpts from the Telegraph article:
Pearson
£12.05 -24p
Questor says SELL...
PEARSON [LON:PSON], the media group that owns The Financial Times newspaper, has taken a big gamble on the education sector, while a slowdown in the US has left the shares looking overvalued. ......The increased testing of children is also coming under scrutiny in North America. The standard test for maths and English - the Partnership for Assessment of Readiness for College and Career (PARCC) - that Pearson administers across 11 states is also being looked at in more detail. ...
Shares fail the test
The shares are now almost exactly where they were at the start of 2013, after they have steadily recovered from a shock profit warning at the start of last year.
However, given the difficulties in their largest education market in the US, a rating of 17 times forecast earnings looks far too optimistic.
The shares may offer an attractive dividend yield of 4.3 pc (percent), but the dividend payments don't look all that secure, as they are only covered 1.4 times by earnings.
The profit recovery that is expected this year could also falter in the second half.
The shares don't pass our test. Sell.
And a bit more, from Politico's Morning Education on June 29, 2015:
PARCC SUFFERS BUCKEYE BLOW: Ohio state lawmakers sent Republican Gov. John Kasich a budget [http://bit.ly/1IicfiH] late last week that provides more money for schools, freezes tuition rates at public colleges for two years - and abandons the PARCC test. Kasich could line item veto the PARCC measure, but he's widely expected [http://politico.pro/1e8ICUP ] to sign it without doing do so. Ohio has been a governing state in PARCC and the loss of the Buckeye State is a big blow to the testing consortium. "The PARCC brand name has been so badly damaged that even though people are more comfortable and familiar with it, the anger and the angst over it would still be there and that just wouldn't be a good environment for things," said state Education Committee Chairman Peggy Lehner, a Republican. Lehner told Morning Education that the decision to leave PARCC came down to the backlash against it, with teachers concerned about the use of test scores in hiring and firing decisions, the length of the test and the Common Core standards themselves.
- Following complaints from Ohio and elsewhere, PARCC announced [http://politico.pro/1FFVW98 ] last month that it was shortening the test and consolidating two testing windows into one. Lehner said she was open to trying PARCC for another year, but the testing group didn't shorten the test enough to satisfy critics. "I could see the writing on the wall that PARCC just wasn't going to be viable, maybe for the wrong reasons, but at the end of the day it just wasn't going to be viable," she said. Late last week, spokesman David Connerty-Marin said he was confident in the future of PARCC's work. "PARCC is the highest-quality assessment on the market and ... we will maintain current competitive pricing into the future." His statement: http://politico.pro/1Nkfq9a.
- 'Ohio has a big task in front of it," said Chad Aldis, vice president for Ohio policy and advocacy at the Fordham Institute. "It needs to adopt and implement a high-quality, aligned assessment for next school year. It's imperative that this transition be handled in a way that isn't disruptive to students and teachers.'
- As for PARCC's other governing board members: The test is in trouble in Arkansas; Massachusetts hasn't fully committed and Republican Gov. Charlie Baker has questioned the test; and a fellow Republican, Maryland Gov. Larry Hogan, has said he's a Common Core and PARCC skeptic: http://bit.ly/1LwwwCb.
And one more, from Politico's Morning Education on June 30, 2015- the day that Questor advised Pearson investors to SELL:
-- Elsewhere, Ohio Gov. John Kasich, a Republican, is expected to sign a budget today that abandons the PARCC test. Kasich has to sign the budget, which would also provide more money for schools and freeze tuition rates at public colleges for two years, by today so it can take effect on Wednesday. It's a big blow to PARCC, which has already seen a number of state members drop or question the test. But PARCC is working on ways for additional states, districts and other entities to get involved in the testing group, CEO Laura Slover wrote in a recent letter. Those new players could include Catholic schools and charter school organizations, she wrote. More: http://politico.pro/1U1XRjj. (Archived June 30, 2015, link available here)
Sounds like Pearson CEO Fallon should have spent more time on US K-12 Education Plan B at least two years ago. At least.
That's okay. Former Common Core insider Laura Slover is going to drum up some PARCC business from parochial and charter schools.
Wonder if she can do so before Pearson investors listen to Questor.
Kind of like sweeping up crumbs to reshape a cookie of desperation.
Originally posted 06-30-15 at deutsch29.wordpress.com
Schneider is a southern Louisiana native, career teacher, trained researcher, and author of the ed reform whistle blower, A Chronicle of Echoes: Who's Who In the Implosion of American Public Education.
She also has a second book, Common Core Dilemma: Who Owns Our Schools?, newly published on June 12, 2015.
