Pearson, which sold the Financial Times and its stake in The Economist this year to focus on education publishing, said earnings per share would be at the lower end of a new 70 to 75 pence forecast, down from 75 to 80 pence previously.

The British company said the lower range also reflected the negative impact of the asset sales this year and unfavourable movements in exchange rates, a move that disappointed analysts still bruised by profit downgrades in 2012 and 2013.

"This is a new, painful negative as we thought things had bottomed," analysts at Investec said in a note.

Pearson said underlying sales fell 4 percent in the third quarter, after a 1 percent rise in the first half of the year, as the U.S. economic recovery meant fewer students were going to college and text book sales in South Africa fell.

Pearson's shares slumped as much as 18 percent to 975 pence and putting it track for its biggest one-day fall for 28 years.

Some analysts questioned whether the company's challenges were as much structural as cyclical though Pearson's Chief Executive John Fallon said they were the latter and the situation would turn in two to three years.

Fallon said the cyclical trends in education, such as the U.S. economic recovery and some government policies on spending in places such as South Africa, had yet to improve.

"These are factors that we've been grappling with for some years," he told Reuters in an interview.

"It's frustrating they are taking longer to work their way through than we would have liked, but we are confident they will work their way through."

He said U.S. college enrolments were down about 2 percent, which was more than the unchanged to slight fall he expected.

"But it will turn, and it will turn over the next two to three years, not least because you've got a large and growing high school population in America," he said.

Earnings per share of 70 pence for 2015 would still be the first rise since 2011 but it represents another blow to investor confidence after the previous profit downgrades.

Numis analyst Gareth Davies, who cut his target price to 1,040 pence from 1,110 pence, has a "reduce" rating on Pearson.

He said as well as the cyclical nature of education markets, Pearson faced the challenge of changing from a traditional media business to a digital education business.

(Editing by David Clarke)

By Sarah Young and Paul Sandle