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Why Rollins Stock Climbed 11.9% in October

By Keith Noonan - Nov 6, 2019 at 4:50PM

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Rollins' return to earnings growth in the third quarter helped the stock post double-digit gains last month.

What happened

Shares of Rollins (ROL 2.81%) gained 11.9% in October, according to data from S&P Global Market Intelligence. The pest-control stock got a boost after the company released its third-quarter results on Oct. 22 and announced its seventh consecutive annual special dividend.

ROL Chart

ROL data by YCharts.

Rollins announced a quarterly dividend of $0.105 per share, paid to shareholders of record on Nov. 11 on Dec. 10 -- in line with the previous three quarters. The press release also detailed the company's plan to issue a special dividend of $0.05 per share with the same qualification and payment dates.

A dead cockroach on a counter.

Image source: Getty Images.

So what

Sales for the third quarter rose 14.1% year over year to reach $556.5 million, and adjusted earnings per diluted share came in at $0.22 -- up 10% year over year. The stock had slumped earlier in the year after earnings slipped in the first quarter and were flat in the second quarter, and investors welcomed the return to earnings growth. Revenue growth in the quarter was partially driven by the company's acquisitions push, but organic revenue growth still came in at 6.4% year over year. 

The company's special dividend of $0.05 for this year represents a significant decline from the $0.14 per-share special dividend that it paid last year, even after accounting for the 3-to-2 stock split it carried out last December. However, investors may have been pleased with the size of the special dividend, given that Rollins is currently incurring significant expenses related to phasing out its pension program. The company has delivered regular dividend payout growth for the last 17 years. Including this year's special dividend, the stock now has a forward yield of roughly 1.2%. 

Now what

As is normal for the company, Rollins didn't provide forward quarterly guidance with its latest earnings report. The average analyst estimate projects that the company will post earnings per share of $0.17 on sales of $505.3 million.

Rollins stock trades at roughly 53 times this year's expected earnings.

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