How's this pedigree? ServiceMaster
From lawn care to pest control, ServiceMaster is the company residential and commercial customers turn to when they want to outsource everyday needs. It's not a high-growth business, but ServiceMaster trades for a modest 12 times trailing earnings, and its dividend yield is a not-so-modest 2.4%.
After reviewing last quarter's results, I concluded: "With double-digit earnings growth projected in the future, and the company investing heavily in infrastructure to support its long-term prospects, the stock is tempting (to me) as a way to meet or beat the stock market's long-term performance."
In today's second-quarter results, earnings increased 13% year over year on 8% revenue growth. More importantly, operating income shot up 18.1%. Those results include a $6 million favorable non-recurring adjustment in 2004.
At 26% of sales and 39.6% of operating profit, termite and bug exterminator Terminix put in a standout performance for the company. An expanded sales force, an increased geographic presence, and a new termite bait product helped realize those results.
ServiceMaster's largest business, lawn-care specialist Tru Green (40.7% of sales, 47.3% of profits) contributed a 5% sales increase but only a 4% improvement in operating profits. Furthermore, its numbers this quarter were helped by delayed first-quarter revenue. Although ServiceMaster says it's confident of the future success of this business, Tru Green's $2 million (3%) decrease in H1 2005 profits compared to the year-ago period is not encouraging.
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Further Foolishness, at your service:
- See ServiceMaster's latest quarter by the numbers.
- Last February, the company served up cash.
- Flash back to when Warren Buffett first picked ServiceMaster.
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