Rentokil: Indications Appear Positive for Pest Control Growth Revival Plan in North America

Wide-moat Rentokil Initial’s recently announced North America sales and marketing initiatives are showing signs of modest success in early 2024. First-quarter organic pest control sales growth of 1.5% in North America represents decent progress following a decidedly weak finish to 2023 and tracks in line with our expectations for 2% organic growth in 2024—reflecting a modest improvement in sales performance in Rentokil’s largest and most important market. For the broader pest control category, organic sales grew 2.7% in the first quarter, in broad agreement with our full-year 2024 forecast of about 3.5%. Elsewhere, first-quarter organic growth of 3.8% for the smaller hygiene & wellbeing category tracked broadly in line with our full-year expectations of about 4.5% in 2024. While the first-quarter performance was a touch soft, we make no change to our full-year financial estimates or our GBX 600 fair value estimate.