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Rollins (ROL) Gains From Top-Line Strength Amid Expense Woes

By Zacks Investment ResearchStock MarketsMar 03, 2021 10:38PM ET
Rollins (ROL) Gains From Top-Line Strength Amid Expense Woes
By Zacks Investment Research   |  Mar 03, 2021 10:38PM ET
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Rollins (NYSE:ROL), Inc. ROL is currently benefiting from a balanced approach to organic and inorganic growth.

The company recently reported better-than-expected fourth-quarter 2020 results. Adjusted earnings of 13 cents per share came ahead of the Zacks Consensus Estimate as well as the year-ago figure by 18.2%. Revenues of $536.3 million beat the consensus mark by 1.7% and improved 6% year over year.

The company’s shares have gained 19.6% in the past year, underperforming the 20.5% rally of the industry it belongs to.

Top Line is in Good Shape

Demand environment for this building maintenance servicer remains in good shape driven by decent construction activity. A balanced approach to organic and inorganic growth has been benefiting the company’s revenues that have increased at a compounded annual growth rate of 6.6% over the past five years.

Rollins, Inc. Revenue (TTM)

Enhancing benefits are expected to improve employee and customer retention for the upcoming years, driving organic growth. Further, with the help of strategic acquisitions, the company continues to expand its global brand recognition and geographical footprint, while also boosting revenues. Rollins completed 31 acquisitions in 2020. It made 30 acquisitions in 2019 and 38 in 2018.

Costs Stay High

Rollins is witnessing escalation in costs, resulting from acquisitions and IT-related expenses. Notably, sales, general and administrative expenses increased 2.8% year over year in fourth-quarter 2020 and 5.3% in full-year 2020. So, the company's bottom line is likely to remain under pressure going forward.

Zacks Rank and Stocks to Consider

Rollins currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Business Services sector are Omnicom OMC, Gartner (NYSE:IT) IT and TeleTech Holdings TTEC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected earnings per share (three to five years) growth rate for Omnicom Gartner and TeleTech is pegged at 4.7%, 13.5% and 14.7%, respectively.

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Rollins (ROL) Gains From Top-Line Strength Amid Expense Woes

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Rollins (ROL) Gains From Top-Line Strength Amid Expense Woes

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