(ROL - Snapshot Report
) has been rolling. The company recently delivered its 22nd consecutive quarter of record performance and posted sales and EPS above the Zacks Consensus Estimates.
Analysts raised their estimates for both 2011 and 2012 off the strong quarter, sending the stock to a Zacks #2 Rank (Buy). Based on current consensus estimates, analysts project 11% EPS growth this year and 10% growth next year.
Rollins also has a solid balance sheet and generates strong free cash flow, which it has used to buy back its stock and raise its dividend. It currently yields 1.3%.
Rollins provides pest and termite control services to residential and commercial customers primarily through its wholly owned subsidiary Orkin.
The company was founded as Rollins Broadcasting, Inc. in 1948 and has a market cap of $3.2 billion.
Third Quarter Results
Rollins reported strong third quarter results on October 26. Earnings per share came in at 20 cents, beating the Zacks Consensus Estimate by a penny. It was a solid 18% increase over the same quarter in 2010.
Revenue rose 6% to $323.9 million, ahead of the Zacks Consensus Estimate of $322.0 million. Rollins experienced growth in each of its business lines in the third quarter.
Residential pest control service revenues, which accounted for 42% of total revenue, increased 8% over the same period while commercial pest control revenues, which also accounted for 42% of total revenue, climbed 6%.
Income before taxes rose 15% as the company leveraged its fixed expenses.
Analysts revised their estimates higher for both 2011 and 2012 off the solid quarter, sending the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2011 is now $0.68, corresponding with 11% EPS growth. The 2012 consensus estimate is currently $0.75, representing 10% annual EPS growth.
Returning Value to Shareholders
Rollins has a solid balance sheet and generates strong free cash flow. In the first nine months of 2011, the company generated $102 million in free cash flow, a 19% increase over the same period in 2010.
Rollins has been using this cash to return value to shareholders through stock buyback and dividend increases. The company has spent $28.8 million year-to-date buying back approximately 1.4 million shares, for instance.
It also pays a dividend that yields 1.3%. Since 2002, Rollins has increased its dividend at a compound annual rate of 24%.
Shares of Rollins trade around 29x the 2012 consensus estimate, a premium to the industry average of 15x. But the stock has traditionally traded at a premium to its peers. Over the last 5 years, Rollins has traded at a median forward P/E of 25.
The Bottom Line
With rising earnings estimates, strong growth projections, a solid balance sheet and shareholder-friendly management, Rollins offers plenty to like.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.