Rollins Earnings: Organic Top-Line Growth Impresses Once More, but Shares Are Priced for Perfection

Wide-moat Rollins’ second-quarter performance remained largely faultless with the delivery of 7.7% organic revenue growth implying further organic share gains in the US pest control market during the quarter. The group’s adjusted EBITDA margin strengthened 140 basis points year on year to 23.6%—in broad accordance with our expectations—as Rollins garnered further benefit from the ongoing economies of density benefits that naturally accrue as its pest control franchise grows and densifies. We’ve lifted our 2024 full-year estimates—now forecasting full-year 2024 EBIT and EPS of $791 million and $1.05, both up 2% relative to our prior forecasts—to reflect the greater buoyancy year to date in Rollins’ top line than we’d previously credited. Our revised estimates align with the 2024 outlook for 7%-8% in organic sales growth with a further 2%-3% contribution to top-line growth from bolt-on acquisitions. In turn, our upwardly revised near-term estimates in tandem with a time value of money adjustment leads us to nudge up our fair value estimate 6% to $37.