Rollins' Top Line Benefits From Acquisitions Amid Increasing Costs

Rollins, Inc.’s ROL surge in demand is driven by strong construction activity. Its ability to provide real-time service tracking and customer internet communication technologies provides a competitive edge. Acquisitions boost geographical footprint, thereby aiding revenue growth. The stock is an eye candy for dividend-seeking investors.

Meanwhile, increasing costs due to rapid buyouts and IT-related investments affect the bottom line. Its low liquidity might discourage investors.

In the fourth quarter of 2024, ROL reported adjusted earnings of 23 cents per share, which met the consensus estimate and increased 9.5% year over year. Revenues of $832.2 million beat the consensus mark by 2% and improved 10.6% year over year. Organic revenues of $814 million increased 8.5% year over year. Rollins’ performance in the quarter was positively impacted by a healthy demand environment for its services.

How is ROL Doing?

Strong construction activity drives the demand for Rollins. In 2024, the top line increased 10% year over year, with all its business lines — residential, commercial and termite — registering growth. Rollins has developed its operating platform in a way that maximizes cross-selling opportunities and cost-effectiveness, and facilitates fast customer service delivery.

ROL’s real-time service tracking and customer internet communication technologies have provided a competitive edge. Its Branch Operating Support System facilitates service tracking and payment processing for technicians, and offers virtual route management tools to boost route efficiency across the network, enabling cost reduction and raising customer retention via quick response service.
Buyouts are significant catalysts for Rollins’ business development, and are assisting in expanding its global brand recognition and geographical footprint, along with increasing its revenues. In 2021, 2022, 2023 and 2024, Rollins completed 39, 31, 24, and 44 acquisitions.

The company returns capital to its investors via dividends. It paid out dividends of $208.7 million, $211.6 million, $264.3 million and $298 million in 2021, 2022, 2023 and 2024, respectively. Consistent dividend payment underscores the company's commitment to shareholders and underlines its business confidence.

Meanwhile, Rollins is witnessing a surge in costs resulting from acquisitions and IT-related costs. The company’s subsidiaries are embroiled in a number of lawsuits, claims or arbitrations that allege its services caused damage. This is adding to costs. Hence, the company's bottom line is likely to remain under pressure, going forward. Its operating costs increased 11.1% year over year in 2022, 13.1% in 2023 and 9.7% in 2024.

Rollins’ current ratio (a measure of liquidity) at the end of the fourth quarter was pegged at 0.69, lower than the industry's 0.91. The current ratio has declined from the year-ago quarter's 0.71. A current ratio of less than 1 indicates inefficient short-term debt coverage ability.

Earnings Snapshot

Fiserv, Inc. FI reported mixed fourth-quarter 2024 results.

FI’s adjusted earnings per share of $2.51 beat the consensus mark by 1.2% and gained 14.6% year over year. Adjusted revenues of $4.9 billion missed the consensus estimate by 1.1% and declined marginally on a year-over-year basis.

Accenture plc ACN posted mixed second-quarter fiscal 2025 results.

ACN’s earnings were $2.82 per share, missing the Zacks Consensus Estimate by a slight margin. The metric increased 1.8% from the year-ago quarter. Total revenues of $16.7 billion beat the consensus estimate by a slight margin but gained 5.4% on a year-over-year basis.

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This article originally published on Zacks Investment Research (zacks.com).

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