William Blair: Bullish Rollins, ServiceMaster Stances Supported By Creepy, Crawly Growth Opportunity

As the U.S. pest control market — and the population it treats — grows, Rollins, Inc. ROL and ServiceMaster Global Holdings, Inc. SERV are well-positioned for organic growth and consistent cash flow, according to William Blair. 

The Analyst

Analyst Tim Mulrooney initiated coverage on pest control providers Rollins and ServiceMaster with an Outperform. 

The Thesis

Rollins is the largest commercial pest control service provider in the U.S., servicing over 2 million customers in 900 locations internationally. The company has generated 5-percent organic revenue growth over the past five years and has the opportunity for more than 15-percent upside over the next 18-24 months, Mulrooney said in a Monday note.

Rollins has "ample runway" for further growth driven by factors such as growing mosquito and bed bug opportunities, international initiatives and increased efficiency from IT investments, the analyst said. 

ServiceMaster provides pest control services through the Terminix brand, which is the largest residential termite control provider in the U.S., accounting for 21 percent of the North American pest control market share, Mulrooney said. While growth has slowed in recent years, Mulrooney said ServiceMaster's turnaround initiatives pave the way for renewed growth opportunity in 2018.

Price Action

At the time of publication, shares of Rollins were trading down 1.07 percent at $49.70, while shares of ServiceMaster were down 0.47 percent at $52.71. 

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