Rollins Earnings: Softened Organic Growth of Late 2023 Disappoints Investors; Shares Still Expensive

Wide-moat Rollins' performance in the fourth quarter of 2023 remained robust, rounding out a third consecutive year of strong execution and pleasing earnings growth. Organic sales growth softened a touch to about 7%, down from 8.4% in the prior quarter, thereby falling short of our expectations for late 2023, with our full-year organic growth forecast of 8.6% implying similar fourth-quarter organic top-line growth to that of the first nine months of year. Still, full-year 2023 sales of $3.1 billion tracked modestly ahead of our forecast owing to a stronger-than-expected contribution from bolt-on acquisitions in late 2023. Rollins' fourth-quarter operating profit margin also underwhelmed us, leading full-year 2023 EBIT of $604 million to modestly trail our forecast.