Rollins (ROL) Up 12.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Rollins (ROL). Shares have added about 12.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rollins due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Rollins Q3 Earnings Beat Estimates
Rollins, Inc. reported better-than-expected third-quarter 2023 results.
Adjusted earnings of 28 cents per share beat the Zacks Consensus Estimate by 16.7% and increased 27.3% year over year. Revenues of $840.4 million beat the consensus mark by 1.5% and improved 15.2% year over year. Organic revenues of $790.5 million increased 8.4% year over year.
Rollins’ performance in the quarter was positively impacted by a healthy demand environment for its services. Management said that the company remains well-positioned for organic as well as inorganic growth. Rollins’ acquisitions pipeline remained strong in the quarter.
Quarter Details
Residential revenues increased 19.7% year over year to $404.3 million and beat our estimate of $370.5 million. Commercial revenues increased 11.8% year over year to $272.2 million but missed our estimate of $277.5 million. Termite and ancillary revenues increased 11% year over year to $155.1 million but missed our estimate of $164.4 million.
Adjusted EBITDA of $208.5 million increased 22.7% year over year. This compares to our expectation of an adjusted EBITDA of $182.4 million, up 7.4% year over year. Adjusted EBITDA margin of 24.8% increased 150 basis points (bps) year over year compared with our expectation of an adjusted EBITDA margin of 22.2%, down 110 bps year over year.
Rollins exited the quarter with a cash and cash equivalents balance of $142.2 million compared with the prior quarter’s $154.7 million. Long-term debt at the end of the quarter was $596.6 million compared with $337.5 million at the end of the prior quarter.
The company generated $147 million of cash from operating activities in the quarter and capital expenditure was $7 million. Free cash flow came in at $141 million. The company generated $127.4 million in cash from operating activities and paid dividends worth $64 million in the quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Rollins has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Rollins has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Rollins, Inc. (ROL) : Free Stock Analysis Report
