ROL changes
Pick any two versions below to diff them.
- Price
- $35.31 → $38.47(+8.9%)
- Discount category
- Well below intrinsic value → Below intrinsic value
- 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. Growth then slowed further. Organic growth was 5.7% in Q2 2026 and 4.4% in Q3 2026, and the Q3 operating margin fell to 20.5% from 21.9%. In October 2026, management said that residential customer acquisition was still under pressure. removed: Piper Sandler cut its rating to Neutral on September 24, 2026, and a added: 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 return to about 6% 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 $120 million in Q3 2026, and for acquisitions. The next evidence comes with the full-year report and the 2027 framework in early 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.
- Recent events
- Oct 21, 2026: 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. Oct 7, 2026: Rollins said that it will report Q3 2026 results after the market closes on October 21, 2026, with a call on October 22. Sep removed: 24, 2026: Piper Sandler cut its rating on Rollins to Neutral, with a $33 price target. The stock fell 6.8% that day. Sep 23, 2026: 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. Jul 22, 2026: 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. Jul 21, 2026: Rollins declared a quarterly dividend of $0.1825 per share, payable on September 10, 2026. May 27, 2026: 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. May 14, 2026: 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%. Apr 22, 2026: 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.