BROKERWATCH Reed Elsevier and Pearson ratings cut at Deutsche Bank

LONDON, Jul 14, 2008 (Thomson Financial via COMTEX) -- DB | Quote | Chart | News | PowerRating -- Deutsche Bank has downgraded its rating on Pearson Plc to 'sell' from 'hold' and that on Reed Elsevier to 'hold' from 'buy', according to dealers, saying the assumption that 2009 will be a recovery year no longer makes sense.

The broker has cut its 2009 EPS estimates for Pearson by 24 percent, on Reed Elsevier by 10 percent, and Wolters Kluwer by 7 percent.

Deutsche said that although the hit to professional publishers is far less severe than for consumer facing stocks, there is some impact.

It said its rule of thumb for strict "professional" activities was that ball-park revenue growth is seen slipping to 2 percent from 5 percent in a macro-slowdown.

For B2B or Education activities, growth slowing to 0 percent from 5 percent was possible, in the broker's view.

On Pearson, it said that earnings will stagnate in 2009 and 2010 in a weak funding environment for Education.

Its 520 pence target would put the stock on a PE of 12 times for 2010.

On Reed Elsevier, it said it expects sentiment drags from both Reed Business Information, with disposal proceeds to undershoot, and from Choicepoint.

It said it retained a 'buy' on Wolters Kluwer, Thomson Reuters and Informa.

Separately, SNS Securities has reiterated its 'buy' rating on Reed Elsevier.

Thomson Reuters is the parent company of Thomson Financial News, the publisher of this report.

brian.gorman@thomsonreuters.com btg/ajb

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