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Why Is Rollins (ROL) Up 6.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Rollins (ROL). Shares have added about 6.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Rollins due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Rollins Beats Earnings Estimates in Q2

Rollins reportedbetter-than-expected second-quarter 2020 results.

Adjusted earnings of 23 cents per share beat the consensus mark by 35.3% and increased 9.5% year over year. The increase was driven by aggressive cost reduction efforts, lower fuel prices and routing and scheduling enhancements.

Revenues of $553.3 million beat the consensus mark by 2.2% and improved 5.6% year over year. Residential revenues recorded 14.8% year over year growth with multiple record setting days of new customer sales.

The company stated that that its cost reduction efforts in the quarter in response to the coronavirus pandemic included layoffs, furloughs, temporary reduction of upper management‘s salaries and omission of non-essential travel and capital expenditures.

Other Quarterly Details

Earnings before income taxes (EBIT) of $103.5 million increased 19% year over year. EBIT margin of 18.7% improved 211 basis points (bps) year over year.

Net income of $75.4 million increased 17.2% year over year. Net income margin of 18.7% improved 135 bps year over year. Sales, general and administrative expenses of $171.3 million were up 5.8% year over year.

Rollins exited the first quarter with cash and cash equivalents balance of $134.8 million compared with the prior quarter’s $92.6 million. Long-term debt at the end of the quarter was $242.5 million compared with $307.3 million at the end of the prior quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 12.9% due to these changes.

VGM Scores

Currently, Rollins has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Rollins has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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