ServiceMaster A Leader In 'Recession-Resistant' Pest Control, Buckingham Says In Positive Initiation

ServiceMaster Global Holdings, Inc. SERV remains a leader in the recession-resistant pest control market through its Terminix brand and should remain competitive, according to the Buckingham Research Group. 

The Analyst

Buckingham’s James Clement initiated coverage of ServiceMaster with a Buy rating and $64 price target.

The Thesis

ServiceMaster’s Terminix brand is an industry leader in the $12-billion pest control market, Clement said in the initiation note. 

The company, along with competitors Ecolab Inc ECL and Orkin parent company Rollins, Inc. ROL, generate 30 percent of industry revenue and hold strong positions in the sector, he said.

“The remaining competitors are typically small 'mom-and-pop' operators with significant dis-economies of scale that often lack the resources to remain competitive.”

Terminix has an 80-20 split between commercial and residential pest control services, giving it a strong standing in a “recession-resistant” market, the analyst said.

ServiceMaster’s American Home Shield spinoff will “likely unlock some value” Clements said, noting that despite a capital-light model, the home warranty company's growth has “far outpaced anything in pest control." 

Price Action

ServiceMaster shares were up 1.95 percent at $55.85 at the close Wednesday. 

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