Rollins, Inc. Earnings Fueled by Zika Fears

By Joe Tenebruso Markets Fool.com

Rollins (NYSE: ROL) reported first-quarter financial results on April 26. The pest control specialist continues to deliver steady gains in revenue and earnings, as fears surrounding insect-borne diseases mount.

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Rollins results: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Revenue

$375.2 million

$352.7 million

6.4%

Net income

$40.3 million

$31.9 million

26.1%

Earnings per share

$0.18

$0.15

20%

Data source: Rollins Q1 2017 earnings press release.

What happened with Rollins this quarter?

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Revenue grew 6.4% year over year to $375.2 million, including 5.2% from organic growth and price increases and 1.2% from acquisitions.

Rollins' growth was broad-based. Residential pest control -- which makes up 41% of Rollins' revenue -- rose 7%. Commercial pest control -- also representing 41% of total revenue -- grew 5.3%. And termite services (18% of revenue) increased 7.5%.

Moreover, Rollins is becoming more profitable as it expands. The company's investments in improved billing and route management software are helping to increase the efficiency of its operations; pre-tax margin rose to 18%, up from 17% in the year-ago period.

All told, net income -- adjusted to exclude a tax benefit -- increased 12.7% to $36 million, and earnings per share rose 13.1% to $0.17 per share.

Looking forward

Rollins Inc. did not offer revenue or earnings guidance, but CEO Gary Rollins highlighted the increasingly important need for Rollins' services during a conference call with analysts.

CNN released their study recognizing that the world is at more of a risk than ever of a global pandemic. And while I'm not an alarmist, this material reinforces the importance of the services we provide both to our customers as well as the public at large. According to CNN's material, more than 28,000 people were infected with the Ebola epidemic during 2014 through 2016, with over 11,000 deaths. And as of March 10 this year, 84 countries have reported Zika transmission. This disease was discovered in the 1940s, but had its first outbreak in 2007 in Micronesia and really began spreading toward the end of 2015. As ... one of the largest providers of residential mosquito service, we feel that we have an important role in protecting and educating the public concerning this pest.

This growing health threat from insects and other pests should be a boon for Rollins' business in the years ahead.

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Rollins. The Motley Fool has a disclosure policy.