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Why ServiceMaster Shares Jumped 9% Today

Lou Whiteman, The Motley Fool

What happened

Shares of ServiceMaster (NYSE: SERV) climbed 9% on Tuesday, and were up by more than 14% midday, after the pest control and home services specialist reported first-quarter results that came in ahead of expectations. It is the second straight post-earnings bump the company has enjoyed, with the shares now up 46% year to date.

So what

ServiceMaster, which provides residential and commercial services under brands including Terminix, Merry Maids, and ServiceMaster Restore, on Tuesday morning reported adjusted first quarter earnings of $0.33 per share on revenue of $482 million, beating consensus estimates for $0.31 per share in earnings and $473 million in sales.

An exterminator sprays the baseboards of a residence.

Image source: Getty Images.

Revenue was up 13% for the quarter, including 3% organic growth at Terminix, 5% at ServiceMaster, and the impact of 11 acquisitions in the first quarter. Company CEO Nikhil Varty on a post-earnings call with investors said he believes the momentum can continue for the remainder of the year.

Our value creation strategy is focused on three priorities. First, we are committed to continuing our focus on building the core of our strong businesses. Leveraging our leading brands in the fragmented and growing industries of pest control, restoration and cleaning, we have the opportunity to drive significant growth by continuing to develop and perfect our operating consistency and service delivery.

The company sees no shortage of additional rollup opportunities, with their focus primarily on businesses in urban areas that complement or expand the existing offerings.

Now what

Varty on the call reiterated the company's expectations of $2.02 billion to $2.05 billion in full-year sales, which would require continued growth through the year.

With the shares trading at about 30 times forward earnings projections(https://finance.yahoo.com/quote/SERV/key-statistics?p=SERV), the market is baking a lot of growth into its expectations. Given how far ServiceMaster shares have climbed already in 2019, it's hard to imagine there is a lot more growth in the stock in the near term. But for now, at least, momentum is clearly on ServiceMaster's side.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.