JPMorgan began coverage of pest control company Rollins with an Overweight rating and a $70 price target, saying the business offers decades of compounding growth potential given its recurring revenues and low household penetration.
The brokerage’s target implies about 24% upside from current levels. Analysts said Rollins stands out in the U.S. pest control industry, which is worth more than $20 billion but remains under-penetrated with household adoption at only about 15%.
“Rollins combines one of the most resilient models in Industrials, with ~80% of revenue generated from recurring service contracts, and a vast untapped market opportunity,” JPMorgan analyst said.
The brokerage expects steady organic growth of 7-8% annually, modest pricing, margin expansion and disciplined bolt-on acquisitions to support double-digit earnings growth over the next two years.
Its forecasts for fiscal 2025 and 2026 earnings per share are 3-5% above consensus.
By segment, Rollins generates about 46% of revenue from residential customers, 34% from commercial clients and 21% from termite and ancillary services.
JPMorgan said its national scale, trusted brands and service quality set it apart from local operators in a fragmented market.
The analysts forecast EBITDA margins rising from roughly 22-23% to 25% by 2027, supported by productivity and technician retention.
They also highlighted Rollins’ conservative balance sheet, recurring cash flows and steady free cash generation.
Near-term catalysts include an enterprise resource planning rollout, procurement savings, ongoing acquisitions and selective international expansion.
JPMorgan said these could reinforce the company’s profile as a rare combination of defensive resilience and structural growth.
Rollins trades at about 30 times forward EBITDA, a premium the bank said is justified by its recurring revenue model and financial flexibility.
Source :
https://www.investing.com/news/stock-market-news/jpmorgan-bullish-on-rollins-as-it-sees-long-growth-runway-in-pest-control-4257918
