ROL changes

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View the full Oct 22, 2026 version

Price: $33.78 → $33.45(−1.0%)
Discount: 19% to 33% → 19% to 34%(−0.0 pts)
Next earnings: 2026-10-21 → 2027-01-21
Next earnings is estimate: No → Yes
Thesis: The market fears that AI search breaks the way Rollins finds new residential customers. Many of its brands get leads from people who search online or call in. Management said that leads fell by double digits from late May 2026 through the end of Q2, and it thinks 50% to 60% of the change comes from the move to AI answers in search, such as Google's AI Overviews. Q2 2026 missed expectations: organic growthGrowth then slowed tofurther. Organic growth was 5.7% in Q2 2026 and 4.4% in Q3 2026, and the Q3 operating margin fell to 1820.75% from 1921.8% because costs were set for faster growth. The stock fell 9.5% after the report. In October 2026, andmanagement said that residential customer acquisition was still under pressure. Piper Sandler cut its rating to Neutral on September 24, 2026. A, and a new CFO since June 2026 adds some doubt. For the gap to close, Rollins must show that its growth model still works when search changes. The checks are clear. Organic growth must stay near the 2026 framework ofreturn to about 6%, with incremental margins near 10% or more. Residential lead volume must stop falling, and relationship channels such as home builders and door-to-door sales must keep growing. Margins must recover after the staff cuts of May and June 2026. Free cash flow must stay strong enough to pay for buybacks, such as the $100120 million in Q3 2026, and for acquisitions. The firstnext evidence comes with the Q3 2026 report on October 21, 2026, and the full-year report and the 2027 framework in Februaryearly 2027. If leads stabilize, the gap can close over the next three to five quarters. If AI search keeps cutting leads, Rollins will need new ways to find customers, and the gap can last into 2028.
Risks: AI answers in search can send fewer people to Rollins' websites and phone lines. Management said that residential leads fell by double digits from late May 2026 through the end of Q2, and that many of its fixes in June and July 2026 did not give results yet. Organic growth slowed to 4.4% in Q3 2026. If this continues, residential organic growth stays below the 7% to 8% medium-term target. Rollins set its costs for 7% to 8% growth, so slower growth cuts margins. The operating margin fell to 18.7% in Q2 2026 from 19.8%, and to 20.5% in Q3 2026 from 21.9%. Insurance and claims costs about doubled in Q3 2026. Medical costs, wages and fuel also rise. Growth depends partly on acquisitions of smaller pest control companies. Higher prices for these companies, or poor integration, would lower returns. The Rollins family controls about a third of the shares, so other shareholders have little say. The CFO changed in June 2026.
Balance sheet: Cash: $109M129M Debt: $716M740M Net debt: $607M Net debt / EBITDA: 1.0× (low)611M Interest cover: 1920× Undrawn credit line: $1.0B, to February 2028 Debt due within 12 months: $216M240M Last debt due: 2035 Rollins funds itself with $500 million of senior notes due February 2035 and with commercial papershort-term debt. Debt is the notes at face value plusShort-term debt was $216240 million of commercial paper at JuneSeptember 30, 2026; theat June 30, 2026, it was commercial paper had an averagewith a term of 4.4a few days. Debt is the notes at face value plus the short-term debt, and the short-term debt is the part due within 12 months. Debt does not include $412399 million of operating lease liabilities. Commercial paperShort-term debt rose from $114124 million at December 31, 2025, mostly to pay for Romex and eight other acquisitions in. In the first halfnine months of 2026, Rollins spent $163 million on acquisitions and $163 million on buybacks. Interest cover is operating income divided by net interest expense for the first halfnine months of 2026. The $1.0 billion revolving credit facility, which ends in February 2028, was not drawn and also backs the commercial paper; it was not drawn at June 30, 2026. Its covenant limits net debt to 3.5 times EBITDA. In September 2026, management said that leverage is about 1 times EBITDA. In Q3 2026, Rollins bought back $100120 million of stock. It pays a dividend of $0.1825 per share each quarter, about $8887 million a quarter. The figures come from the Q3 2026 release, because Rollins had not filed its Q3 10-Q by October 22, 2026. As of 2026-0609-30.
Checkpoints: Oct 21, 2026: Q3 2026 results: organic growth, leads and margin. PendingFailed. Watch: Organic growth near 6%, residential leads that stop falling, and a margin near the Q3 2025 level pass; organic growth well below 6% or a lower 2026 framework fails. Feb Outcome: Organic growth slowed to 4.4%, well below 6%, and the operating margin fell to 20.5% from 21.9%. Jan 21, 2027 (estimate): Full-year 2026 results and 2027 framework. Pending. Watch: About 6% organic growth for 2026, incremental margins near 10%, and a 2027 framework back toward 7% to 8% organic growth pass; a lower 2027 framework fails.
Recent events: 2026-10-21: Rollins reported Q3 2026 results. Revenue grew 6.2% to $1.09 billion, but organic growth slowed to 4.4%. The operating margin fell to 20.5% from 21.9%, and adjusted EPS fell to $0.34 from $0.35. Free cash flow grew 28.8% to $235 million, helped by a $63 million tax refund. Rollins bought back $120 million of stock and paid $87 million of dividends in the quarter. The CEO said that the company is disappointed with the quarter and that residential customer acquisition was still under pressure. Rollins said it moves marketing money from its old digital methods to the channels that give the best return, which include visibility in AI search. The release gave no new outlook. 2026-10-07: Rollins said that it will report Q3 2026 results after the market closes on October 21, 2026, with a call on October 22. 2026-09-24: Piper Sandler cut its rating on Rollins to Neutral, with a $33 price target. The stock fell 6.8% that day. 2026-09-23: At the J.P. Morgan U.S. All Stars Conference, the CEO and the CFO said that residential leads fell by double digits from late May 2026 through the end of Q2. They think 50% to 60% of the change comes from the move to AI answers in search. They kept the 2026 framework of about 6% organic growth and about 10% incremental margins, with more of the result in Q4. Rollins bought back $100 million of its stock in Q3 2026. 2026-07-22: Rollins reported Q2 2026 revenue of $1.08 billion, up 7.9%, with organic growth of 5.7%. The operating margin fell to 18.7% from 19.8%, and adjusted EPS was $0.32. Management said that brands that depend on search, digital media and inbound calls had fewer leads, and that it made changes to align costs with demand. The stock fell 9.5% after the report. 2026-07-21: Rollins declared a quarterly dividend of $0.1825 per share, payable on September 10, 2026. 2026-05-27: Rollins said that CFO Kenneth Krause will leave on June 15, 2026 for a company in another industry. Will Harkins, the Chief Accounting Officer since March 2025, became CFO. 2026-05-14: At its investor conference, Rollins kept its medium-term targets: 7% to 8% organic growth, 2% to 3% growth from acquisitions, 30% to 35% incremental margins in the core business, and free cash flow conversion above 100%. 2026-04-22: Rollins reported Q1 2026 revenue of $906 million, up 10.2%, with organic growth of 6.6%. On April 1, 2026, it bought Romex Pest Control for $95.7 million.