Rentokil Earnings: Share Price Upside Still on Offer as Pest Control Weakness Persists in Late 2023

While the organic sales performance for wide-moat Rentokil Initial’s pest control franchise remained weak in late 2023, investors were nonetheless relieved by Rentokil’s plans to restore growth its North American business, sending shares some 15% higher in early trade. Full-year EBIT of GBP 897 million fell short about 1.5% short of our expectations—owing largely to weaker-than-expected organic pest control performance as full-year organic growth of 4.5% trailed our expectations by about 50 basis points. A weaker-than-expected second-half improvement in EBIT margin in Rentokil’s smaller hygiene & wellbeing category also contributed to the weaker-than-expected result.