On Friday, UBS reaffirmed its Neutral rating on Rollins, Inc. (NYSE:ROL), with a consistent price target of $49.00. The pest control company has projected its revenue growth for the year 2024 to be between 9% and 11% year-over-year, aligning closely with the consensus estimate of around 10%. This expected increase includes 7-8% from organic growth and an additional 2-3% from mergers and acquisitions.
Rollins anticipates an incremental EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin of approximately 30% for 2024, which is slightly higher than the consensus forecast of 28%. This projection suggests a potential modest outperformance compared to the market's current expectations for the upcoming year.
In addition to its 2024 outlook, Rollins has outlined a medium-term growth strategy that includes above-market organic growth and further contributions from mergers and acquisitions. However, it remains to be seen whether more details regarding this strategy will be disclosed at the company's upcoming event. Rollins also expects to sustain incremental adjusted EBITDA margins between 30-35% and maintain a free cash flow (FCF) conversion rate of over 100% over the medium term.
UBS's expectations, as stated in a previous analyst day preview note, were met by Rollins' announcements. The firm had anticipated that the company would signal an organic growth rate of 7-8% and incremental EBITDA margins around 30%. UBS also projected a free cash flow outlook with a conversion rate of roughly 110%. Rollins' actual forecast aligns with these predictions, indicating that the company's performance may meet or slightly exceed UBS's earlier projections.
InvestingPro Insights
Rollins, Inc. (NYSE:ROL) has demonstrated a resilient business model, as reflected in its consistent revenue growth and impressive gross profit margins. With a market capitalization of $22.39 billion and a gross profit margin of 52.31% in the last twelve months as of Q1 2024, Rollins is showcasing its ability to efficiently convert revenue into profit. The company's P/E ratio stands at a premium of 51.18, suggesting that investors are willing to pay a higher price for its earnings potential.
InvestingPro Tips highlight that Rollins has a history of raising its dividend, with an increase for 21 consecutive years, and analysts have revised their earnings upwards for the upcoming period. This confidence from analysts, combined with a dividend yield of 1.27% and a 15.38% dividend growth in the last twelve months as of Q1 2024, indicates a favorable outlook for income-focused investors.
For those interested in further analysis and additional InvestingPro Tips, Rollins has 19 more tips available on InvestingPro. These insights could help investors make more informed decisions about their investments in Rollins. To explore these tips and gain a deeper understanding of Rollins' financial health and prospects, take advantage of our exclusive offer: use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/ROL.
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