Soft Economy Set to Weigh on Rollins' Top Line in 2023, but Inflationary Pressures Should Ease

Rollins delivered a strong finish to 2022 as its fourth-quarter performance capped off a second consecutive year of lofty pandemic-fueled organic revenue growth. Full-year EBIT of $493 million and EPS of $0.75 aligned with our estimates and represented respective growth of 10% and 5% year on year. Strong pest-control volume and outsize price increases—which successfully protected Rollins’ profit margins from cost inflation in 2022—contributed to the robust organic growth. Indeed, the sizable pricing uplift in combination with operating leverage led to a 20-basis-point year-on-year improvement in adjusted EBIT margin to 18.3% despite broad inflationary pressures that affected labor, materials and consumables, and vehicle expenses during 2022.