Company Reports

Rollins is the second-largest pest control firm, operating residential and commercial services primarily in North America. The industry is highly fragmented, with Rollins, Rentokil, and a few smaller global competitors, along with over 40,000 regional and local players worldwide. Rollins’ scale is a cost advantage, as its local route density and ability to spread fixed costs across a larger revenue base contribute to industry-leading margins. The value of its leading brand, Orkin, also creates an intangible asset moat, as it capitalizes on industry-leading awareness to drive organic sales growth at a lower cost.

End-market weaknesses, especially in Rollins' residential business, led to organic revenue weakness, with growth of only 5.7% in the second quarter. This led management to lower guidance for 2026 organic revenue growth to 6%-7% from 7%-8% previously. Shares are down 11% in early trading.

Rollins is the second-largest pest control firm, operating residential and commercial services primarily in North America. The industry is highly fragmented, with Rollins, Rentokil, and a few smaller global competitors, along with over 40,000 regional and local players worldwide. Rollins’ scale is a cost advantage, as its local route density and ability to spread fixed costs across a larger revenue base contribute to industry-leading margins. The value of its leading brand, Orkin, also creates an intangible asset moat, as it capitalizes on industry-leading awareness to drive organic sales growth at a lower cost.

Rollins posted organic growth of 6.6% in the first quarter, with acquisitions contributing another 3.6%. Its commercial and termite segments drove performance.

Rollins is the second-largest pest control firm, operating residential and commercial services primarily in North America. The industry is highly fragmented, with Rollins, Rentokil, and a few smaller global competitors, along with over 40,000 regional and local players worldwide. Rollins’ scale is a cost advantage, as its local route density and ability to spread fixed costs across a larger revenue base contribute to industry-leading margins. The value of its leading brand, Orkin, also garners an intangible asset moat as it capitalizes on industry-leading awareness to gain organic sales growth at a lower cost.

The earlier arrival of winter hurt Rollins' fourth-quarter earnings, particularly in its one-off business, resulting in revenue of $3.76 billion versus PitchBook's consensus of $3.78 billion. Operating margins also missed, further contributing to a 14% share price decline in early trading Feb. 12.

Recent poor performance by Rentokil presents a buying opportunity, as we expect the company to leverage its scale to increase organic growth and margins, leading to a convergence of valuation multiples between Rollins and Rentokil.

Rollins is the second-largest pest control firm, operating residential and commercial services primarily in North America. The industry is highly fragmented, with Rollins, Rentokil, and a few smaller global competitors, along with over 40,000 regional and local players worldwide. Rollins’ scale is a cost advantage, as its local route density and ability to spread fixed costs across a larger revenue base contribute to industry-leading margins. The value of its leading brand, Orkin, also garners an intangible asset moat as it capitalizes on industry-leading awareness to gain organic sales growth at a lower cost.

Rollins continued its strong performance in the third quarter, with organic sales up 7.2% year over year. Adjusted EBITDA margins rose 120 basis points, driven by leverage across all key SG&A categories.

Rollins is the second-largest pest control firm, operating residential and commercial services primarily in North America. The industry is highly fragmented, with Rollins, Rentokil, and a few smaller global competitors, along with over 40,000 regional and local players worldwide. Rollins’ scale is a cost advantage, as its local route density and ability to spread fixed costs across a larger revenue base contribute to industry-leading margins. The value of its leading brand, Orkin, also garners an intangible asset moat as it capitalizes on industry-leading awareness to gain organic sales growth at a lower cost.

Rollins confirms its positive momentum in the second quarter, with organic sales up 7.3% year over year. Adjusted EBITDA came in at $231 million, up 10% despite a 50-basis-point margin contraction due to higher insurance and claims expenses.

Rollins delivered excellent first-quarter 2025 results, with organic sales up 7.5%, aligning with guidance and analyst expectations. Due to a healthy pipeline of acquisitions, management also increased its acquisition guidance to 3%-4% growth from 2%-3%.

We are awarding Rollins a wide intangible assets moat for brands in addition to its existing wide cost advantage moat after transferring coverage to a new analyst. Rollins' leading brand, Orkin, garners an intangible asset moat as it capitalizes on industry-leading awareness to achieve organic sales growth at a lower cost. Rollins’ scale is a cost advantage, as its local route density and ability to spread fixed costs across a larger revenue base contribute to industry-leading margins. Furthermore, we are increasing our fair value estimate by 19% to $44 per share, reflecting higher revenue growth and margin expectations, although the shares remain overvalued.

Rollins is the second-largest pest control firm, operating residential and commercial services primarily in North America. The industry is highly fragmented, with Rollins, Rentokil, and a few smaller global competitors, as well as a large number of regional and local players, numbering over 40,000 globally. Rollins’ scale is a cost advantage, as its local route density and ability to spread fixed costs across a larger revenue base contribute to industry-leading margins. The value of its leading brand, Orkin, also garners an intangible asset moat as it capitalizes on industry-leading awareness to gain organic sales growth at a lower cost.

Wide-moat Rollins closed out 2024 with strength. Fourth-quarter organic sales growth of 8.5% was once again solidly above our long-term market estimates for the US pest control market—evidencing excellent execution in late 2024. Full-year 2024 revenue of $3.4 billion reflected organic sales growth of 7.9%, broadly according with our expectations. However, full-year EBIT of $657 million was slightly short of our estimates, with operational leverage proving elusive in the final quarter of 2024. Still, Rollins’ EBIT margin strengthened some 40 basis points in 2024 to 19.4%, benefiting from the operating leverage afforded by the strong organic growth achieved during the year.

Wide-moat Rollins’ third-quarter 2024 result offered evidence of rising competitive tension in the US pest control market. Rollins’ organic sales growth remained elevated in the quarter, which rose 7.7%, implying ongoing strong execution and resultant market share gains for the number-two player in the US. However, Rollins’ increased allocation to sales and marketing resources during the quarter placed downward pressure on the group EBITDA margin, which declined 80 basis points year on year to 24.0%. We think Rollins’ ramped-up sales and marketing spending—which had a significant, 100-basis-point gross impact on the third-quarter EBITDA margin—speaks to the challenge it faces in maintaining its present above-market organic top-line growth rate and to deliver against its medium-term guidance of “above-market organic sales growth” and the heady long-term growth expectations that are baked into Rollins’ share price.

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.

Rollins’ strategy is to reinforce the density benefits afforded to its market-leading operations in the highly localized pest-control services markets it competes in across North America. Ever-improving unit costs are offered by economies of density in each regional market in which Rollins operates. Rollins seeks to continue to amass these benefits via organic growth and a continued focus on tuck-in acquisitions aimed at rolling up the fragmented North American pest-control services market.

We retain our $35 fair value estimate for wide-moat Rollins with the group unveiling no major changes in its strategic priorities at its 2024 investor day. Rollins outlined key pest market segments and verticals it will target—aimed at maintaining strong organic growth through the medium term—and opportunities to support its favorable position on the pest control industry cost curve. Rollins expects the execution of its strategy to perpetuate strong earnings growth for the group, as guided to in the group’s upbeat medium-term outlook. Nonetheless, Rollins shares eased in early trade—down about 2% of the time of writing—with the group’s mid- to high-single-digit organic growth target likely acting as a reminder to investors that the impressive top-line performance of the business in recent years may prove challenging to replicate long term. Rollins shares remain significantly overvalued, in our view, trading at a steep 32% premium to our unchanged fair value estimate.

Wide-moat Rollins’ got off to a strong start in the first quarter of 2024. First-quarter sales grew by about 14%, including 7.5% in organic growth. The pleasing first-quarter organic growth outcome likely points to further outperformance of Rollins’ pest control business relative to the broader US pest control market in early 2024. Inclusion of revenue from the Fox acquisition—which completed part way through 2023—largely accounted for the remainder of the strong top-line result. The group’s EBIT margin widened by 130 basis points to 18.3%, with Rollins benefiting from operating leverage as its revenue base increases and its service technician route density improves.