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Investing.com - Bernstein SocGen Group reiterated an Outperform rating on Rollins (NYSE:ROL) with a $70.00 price target, citing significant transformation opportunities under new leadership. This target represents a 20% upside from the current price of $58.22, though InvestingPro data suggests the stock is trading above its Fair Value. Rollins has already delivered an impressive 27.13% return year-to-date.
The firm highlighted that after more than 75 years as a family-run business, Rollins is undergoing modernization efforts led by CEO Jerry Gahlhoff, the first non-Rollins family chief executive, and CFO Ken Krause, who has experience transforming family-owned companies. This transition comes as the company maintains its impressive 55-year streak of dividend payments, with 23 consecutive years of dividend increases.
Bernstein identified an "underappreciated cost-cutting opportunity" at Rollins, noting that the company’s administrative costs are 300 basis points higher than its closest competitor, suggesting room for efficiency improvements. Despite these higher costs, InvestingPro data shows Rollins maintains impressive gross profit margins of 52.86%, with an EBITDA of $842.54 million in the last twelve months. InvestingPro Tips highlight that Rollins operates with a moderate level of debt and cash flows can sufficiently cover interest payments.
The research note pointed to Krause’s track record at MSA Safety, where he led a cost-cutting program that reduced SG&A as a percentage of sales by 570 basis points, from 27.9% to 22.2%.
Bernstein also emphasized that management compensation structure now incentivizes cost reduction, with the CFO’s compensation approximately 80% variable—three times larger than previous plans—and tied to EBITDA growth and margin improvement, with a potential target of 24.0% average EBITDA margin for fiscal years 2025-2027. While Rollins shows strong operational metrics, investors should note it trades at elevated multiples with a P/E ratio of 54.92 and EV/EBITDA of 34.18. For deeper insights into Rollins’ valuation and growth prospects, comprehensive Pro Research Reports are available through InvestingPro, covering this and 1,400+ other US equities with expert analysis.
In other recent news, Rollins, Inc. has announced the completion of a secondary public offering involving 17,391,305 shares of its common stock at a price of $57.50 per share. This offering was conducted by existing stockholders LOR, Inc. and Rollins Holding Company, Inc., and did not generate any proceeds for Rollins itself, as the company did not sell any shares. The underwriter, Morgan Stanley, has a 30-day option to purchase up to an additional 2,608,695 shares from the selling stockholders. Additionally, Bernstein has initiated coverage on Rollins with an Outperform rating and set a price target of $70.00, highlighting the company’s transformation under new leadership. Rollins’ recent activities include a proposed $1 billion secondary public offering by the same stockholders, with an option for Morgan Stanley to purchase up to an additional $150 million of shares. Rollins has clarified that it will not receive any proceeds from these transactions. These developments reflect significant movements in the company’s stockholder activities and analyst perspectives.
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