Rollins, Inc. (NYSE: ROL) shares fell more than 13% in extended trading Wednesday after the pest control giant reported fourth-quarter results that missed Wall Street estimates on both the top and bottom lines. Despite recording its 24th consecutive year of revenue growth, the company’s performance was tempered by lower-than-expected seasonal work, which management attributed to volatile weather conditions.
Quarterly Financial Shortfall
For the quarter ended Dec. 31, 2025, the Atlanta-based operator of Orkin and HomeTeam Pest Defense reported net sales of $912.9 million, a 9.7% increase compared to the same period in 2024. However, the figure fell short of the $926.8 million consensus estimate. Organic revenue, which excludes the impact of acquisitions, rose 5.7%, while the remaining 4.0% of growth was driven by the company’s ongoing acquisition strategy.
On a profitability basis, Rollins posted adjusted earnings per share (EPS) of $0.25, missing the analyst expectation of $0.27. Net income rose 10.2% to $116.4 million, but margins faced slight compression. The operating margin for the quarter was 17.5%, a decrease of 60 basis points from the prior year, primarily due to cost of sales rising faster than revenue.
Full-Year 2025 Performance
Despite the fourth-quarter miss, the full-year 2025 data underscored a period of double-digit expansion for the company. Rollins reported total annual revenue of $3.76 billion, up 11.0% year-over-year.
Key Annual Performance Indicators:
Organic Revenue Growth: 6.9%
Adjusted Net Income: $544.4 million, a 13.6% increase.
Adjusted Diluted EPS: $1.12, up 13.1% from 2024.
Operating Cash Flow: $678.1 million, an 11.6% improvement.
Acquisition Spend: $310 million deployed across various regional and global brands.
Executive Vice President and CFO, Kenneth Krause, noted during the earnings call that while erratic weather patterns hindered one-time and seasonal service lines, the company’s recurring business remained a pillar of stability. He highlighted that recurring revenue, which accounts for more than 80% of the company’s total sales, grew by more than 7% organically for both the quarter and the full year.
Strategy and 2026 Outlook
Looking ahead to 2026, Rollins management expressed confidence in the underlying health of the pest control market. The company anticipates another year of sustained organic growth, supplemented by a disciplined approach to mergers and acquisitions.
The 2026 strategy focuses on:
Pricing Initiatives: Implementing price adjustments to offset inflationary pressures in labor and materials.
Modernization: Continued investment in operational technology to drive efficiency and improve margin profiles.
Capital Allocation: Maintaining a balanced posture that includes compounding cash flow, dividends, and strategic acquisitions.
“We delivered solid financial results in 2025 and made important progress on a number of key initiatives,” said Jerry Gahlhoff, President and CEO. He added that customer and teammate retention rates remain high, suggesting that the company’s core consumer environment remains fundamentally unchanged despite the quarterly volatility.
Sector and Macro Context
Rollins operates within a highly fragmented global pest control industry, which has historically shown resilience during economic downturns due to the essential nature of the service. However, the 13% drop in share price suggests that investors may be wary of the company’s premium valuation—currently trading at a price-to-earnings (P/E) ratio significantly higher than the broader industrials average—amidst a slowdown in organic growth compared to previous quarters.
Analysts have noted that while Rollins remains a “market leader,” the fourth-quarter margin contraction of 60 basis points will likely lead to increased scrutiny on the company’s ability to scale its 2025 acquisitions profitably. The pest control sector has seen increased competition and rising labor costs, putting the onus on large operators to demonstrate superior operational leverage.
Reasons to Pass on ROL
Q4 earnings miss: Adjusted EPS of $0.25 fell short of the $0.27 consensus estimate.
Revenue miss: Q4 net sales of $912.9 million trailed the $926.8 million analyst expectation.
Share price reaction: Stock declined more than 13% in extended trading following the results.
Margin compression: Operating margin narrowed 60 basis points to 17.5% as cost of sales rose faster than revenue.
Weather-related volatility: Lower-than-expected seasonal work due to erratic weather weighed on quarterly performance.
Moderating organic growth: Q4 organic revenue growth of 5.7% marked a slowdown relative to prior periods.
Acquisition reliance: 4.0% of quarterly revenue growth came from acquisitions, increasing integration and execution risk.
Premium valuation concerns: Shares trade at a P/E ratio above the broader industrials average, heightening sensitivity to earnings disappointments.
Acquisition scrutiny: Investors may question the company’s ability to scale 2025 acquisitions profitably amid margin pressure.
Cost pressures and competition: Rising labor costs and increased industry competition could limit operational leverage going forward.
The post Rollins Reports 11% Annual Revenue Growth, But Q4 Margins Narrow first appeared on AlphaStreet News.
