Jefferies raises Rollins stock rating to buy, price target to $65

Published 02/06/2025, 07:32
Jefferies raises Rollins stock rating to buy, price target to $65

On Monday, Jefferies analyst Stephanie Moore upgraded Rollins stock from Hold to Buy, setting a new price target of $65.00, up from the previous $55.00. The upgrade reflects the firm’s positive outlook on Rollins’ future performance, citing high-quality earnings growth and the potential for strategic acquisitions. The stock, currently trading near its 52-week high of $57.63, has delivered an impressive 24.28% return year-to-date. According to InvestingPro analysis, Rollins appears to be trading above its Fair Value, with a high P/E ratio of 57.81x.

Rollins, listed on the New York Stock Exchange under the ticker (NYSE:ROL), has been identified by Jefferies as a consistent performer with high single-digit organic growth, steady margin expansion, and the ability to potentially engage in tuck-in mergers and acquisitions. With a substantial market capitalization of $27.75 billion and impressive gross margins of 52.7%, the company has demonstrated strong operational efficiency. The analyst’s confidence in the company’s growth trajectory is supported by an analysis of hiring trends and marketing investments.

According to Moore’s assessment, Rollins’ job listings for sales professionals significantly exceeded historical averages in the past year, with increases of approximately 49% for 2024 and 40% for the first quarter of 2025. These figures underpin the analyst’s optimism about the company’s ability to maintain its organic growth rate.

Jefferies has revised its growth estimates for Rollins, now expecting 7.8% organic growth in 2025 and 7.5% in 2026, an increase from the earlier projections of 7.5% and 6.6%, respectively. The firm anticipates that Rollins will continue to improve its margins, forecasting a 60 basis point expansion in EBITDA margin by 2026, reaching 24%.

The price target of $65 is based on a 32 times multiple of the firm’s estimated 2026 enterprise value to EBITDA ratio. Jefferies justifies this premium valuation by pointing to Rollins’ robust organic growth, approximately 12% EBITDA growth, and an expected 14% growth in free cash flow. The company has maintained 22 consecutive years of dividend increases, demonstrating consistent shareholder returns. For deeper insights into Rollins’ valuation metrics and growth potential, including 15 additional exclusive ProTips, check out the comprehensive research available on InvestingPro.

In other recent news, Rollins Inc . reported its first-quarter 2025 earnings, with earnings per share (EPS) of $0.22 and revenue of $823 million, meeting analysts’ expectations. The company achieved a 9.9% year-over-year revenue growth, and its gross margin reached a record high of 51.4% for the first quarter. Rollins also announced the acquisition of Sala Pest Control, which is expected to add $45-50 million in revenue for 2025 and contribute to its long-term growth strategy. Additionally, the company held its 2025 Annual Meeting of Shareholders, where Paul D. Donahue was appointed to the Board of Directors. Shareholders re-elected several directors and ratified Deloitte & Touche LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025. Despite these developments, Rollins’ stock experienced a decline in after-hours trading, attributed to broader market trends. The company maintains a positive outlook, projecting organic growth of 7-8% for the year, with M&A activities expected to contribute an additional 3-4% growth.

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