Spruce Point Capital maintains “strong sell” view on Rollins

Spruce Point, in a research note, writes that it maintains a “Strong Sell” opinion on Rollins (ROL) following the “alarming” results from Rentokil (RTO). Spruce Point states: “This morning, Rentokil issued its Q3 Trading Update. Rentokil is the #1 player in the North American insect and pest control market, and we believe its warning results are a clear message to Rollins’ investors that significant growth and margin challenges are present. At the time of writing, Rentokil’s share price is down 20%. We will explain why we believe that Rollins’ share price is even more exposed than Rentokil’s and we reiterate our 30%-40% downside risk to ROL’s share price. In July 2023, Rentokil reported H1 organic revenue growth of 4.1% and said to expect similar organic revenue growth results in H2. Today, Rentokil reported North American organic growth of 2.2%, a sharp deceleration and disappointment. Rentokil reduced its North American margin expectation to 18.5%-19.0% from its 19.5% target guidance.”