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Here's Why Shares of Rollins Plunged on Wednesday

Lou Whiteman, The Motley Fool

What happened

Shares of Rollins (NYSE: ROL) fell by more than 9% on Wednesday after the pest-control specialist reported first-quarter results that bugged investors by falling shy of analyst estimates.

So what

Rollins, which provides commercial and residential pest control in the U.S. and internationally through Orkin and other brand names, reported first-quarter earnings of $0.14 per share on revenue of $429.1 million, missing consensus estimates for $0.15 per share in earnings on sales of $437.27 million. It's the second straight quarterly miss for Rollins, following a similar $0.01-per-share miss on light revenue in the fourth quarter of 2018.

A pest-control specialist sprays the floorboards of a house.

Image source: Getty Images.

CEO Gary W. Rollins said in a statement that the weather impacted first-quarter results, blaming "arctic weather and torrential rains" in many parts of the country for delaying the emergence of termites and other pests. Rollins was also impacted by a higher tax rate, the strength of the U.S. dollar, and higher expenses related to acquisitions and employee benefits.

"We look forward to warm weather and the spring pest season," Rollins said. "Our operations were well prepared and ready for a spring that has been delayed in many parts of the United States."

Now what

Rollins does not provide guidance to Wall Street, so investors shouldn't be too upset over a slight miss. The shares dropped after that fourth-quarter miss but more than recovered in the months that followed, only to fall back to near those levels again on Wednesday.

ROL Chart

ROL data by YCharts.

The company is not cheap, trading at more than 55 times trailing earnings, but given the fragmented nature of the pest-control industry, there are still ample opportunities domestically and abroad to roll up additional businesses. Rollins, despite the post-earnings volatility, has been an overachiever, up 192.7% over the past five years compared to the S&P 500's 56.42% growth.

The company remains a solid long-term operator, but investors need to be aware that Rollins seems to have an issue hitting the exact target analysts set for its quarterly results.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Rollins. The Motley Fool has a disclosure policy.