Rollins (ROL) Stock Forecast & Price Target

Rollins has demonstrated a notable improvement in its contribution margin, achieving 18% in Q2, which reflects enhanced operational efficiency. The outlook for the second half of the year appears positive, with organic sales anticipated to accelerate and merger and acquisition-related sales growth exceeding management's expectations of 3%-4% growth contribution for 2025. Furthermore, the company's incremental margin is projected to increase significantly in the latter half of the year to between 25% and 30%, indicating a strong recovery from the prior quarter's challenges.

Rollins has faced significant financial pressure, primarily due to growth investments and one-time insurance and claims headwinds, which negatively impacted its EBITDA margin by 70 basis points. In the second quarter, both gross margin and selling, general, and administrative (SG&A) expenses were adversely affected by these claims, while ongoing growth investments have continued to exert additional pressure on SG&A. Moreover, the company's gross margin of 11% in the first quarter fell below its target range of 25-30%, raising concerns about operational efficiency and profitability.