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Why ServiceMaster Stock Popped 15% Today

By Rich Smith – Updated Apr 21, 2019 at 8:18PM

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Despite the earnings miss, Terminix is showing accelerating growth.

What happened

ServiceMaster (TMX -2.49%) stock is up a good 15.1% as of 11:35 a.m. EST after the company reported earnings below estimates for fiscal fourth-quarter 2018 but surpassed expectations for revenue.

For Q4, ServiceMaster lost $1.83 per diluted share (on a GAAP basis), but claimed a $0.19-per-share "adjusted profit" -- still below Wall Street's $0.21 forecast. The $457 million in Q4 sales the company pulled down, however, edged out analyst expectations for $446.5 million, and represented 12% year-over-year growth.

For the full year, the company lost $0.30 per diluted share (GAAP), but grew its revenue 8% to $1.9 billion.

Cartoon professor pointing to a red stock arrow going up

Why is Terminix stock up? Despite the earnings miss, Terminix is showing accelerating growth. Image source: Getty Images.

So what

Despite the quarterly and full-year losses, investors seem pleased with ServiceMaster's results. Why?

CEO Nik Varty explained that having completed its spinoff of American Home Shield on Oct. 1, 2018, ServiceMaster's "primary goal in 2018 was to transform [Terminix pest control] business and unlock the potential to drive sustainable revenue growth."

Terminix appears to be succeeding in this, with full-year sales growth of 7% accelerating to 12% in the fourth and final quarter of the year. (Profits for the unit, however, appear to have declined year over year.)

Check out the latest ServiceMasterearnings call transcript.

Now what

As for this year, ServiceMaster is guiding for 6% to 8% revenue growth to somewhere between $2.02 billion and $2.05 billion. Management did not give GAAP earnings guidance for this year, couching its projected earnings in terms of "adjusted EBITDA" instead.

For what it's worth, though, analysts are projecting that ServiceMaster will earn $1.45 per share in 2019, a 27% year-over-year drop. That hardly seems to me like a number to get excited about. Nevertheless, investors are bidding the shares up.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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