Pearson (PSON) may have finally turned a page, its share price looking the perkiest in a long time; +11%. This comes courtesy of a reassuring and long overdue trading update comprising 6% underlying Q1 sales growth, in line with guidance. Coupled with a review of its US K12 business, and plans for another £300m in cost cutting as the group continues to restructure and pivot from print publishing towards digital and education, bullishness has returned.

The FY outlook and guidance may be unchanged but it’s too early for management to dare an upgrade. For loyal investors it’s a case of small mercies, after 2017 guidance was cut and 2018’s withdrawn so abruptly in Jan. Especially reassuring is Q1 growth benefiting from North American higher education. Firstly because it’s normally a quiet quarter. Secondly because it was an unprecedented worsening in trading conditions for this geography and segment around the turn of the year that resulted in January’s capitulation by management.

The shares may already be off their best levels (+17.4% at one point) but they are holding their gap/break up above February’s hitherto 2017 highs of 716p. And this corresponds with Sept/Oct/Nov lows which could now revert back to support to provide a platform for further gains. A bullish test of the 200-day moving average (750p) also bodes well in terms of potential for a meaningful breakout.

It’s not in the bag yet, but it’s a step closer to the trend change bulls have been pining after, finally overcoming a 2yr decline that would have tested the patience of a saint with multiple profits warnings and a 65% decline from 14 highs.

Mike van Dulken, Head of Research, 5 May 17