Key Takeaways
- Rentokil Initial shares rose 9% today after third-quarter organic revenue grew 3.4% and the board approved a $200 million share buyback.
- North American residential leads improved to about a 1% decline in September after a weak July and August. That’s an early sign that CEO Mike Duffy’s turnaround is working.
- Rentokil still expects 2026 profit in line with market forecasts, even though CFO Paul Edgecliffe-Johnson retires at the end of January.
- The stock still trades well below its five-year average forward P/E, and the next test is the full-year results in February.
Rentokil Initial (RTO) shares are up 9% today after a solid third-quarter update and a new $200 million share buyback.
CEO Mike Duffy said he’s “encouraged by the progress we’ve made since setting out our priorities in July.” This quarter, North America finally gave him something to point to.
The leads are coming back
Organic revenue grew 3.4% for the group and 2.4% in North America Pest Control Services. International Pest again grew fastest, up 5.7%.
The most important number is North America’s residential lead flow. CFO Paul Edgecliffe-Johnson said on Rentokil’s third-quarter call that it fell by a mid-to-high single-digit percentage in July and August. In September it improved to about a 1% decline.
That’s a big swing in one month. The company credits a bigger call center and a sharper focus on leads it generates itself.
Next, Rentokil is splitting North America’s Residential and Commercial businesses, and each now has its own leader. Duffy said on the call that bringing North America back “to market levels of organic growth” is his first priority. Savings in International and group central costs will pay for it.
TIKR tracks 3 analysts on Rentokil Initial. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Rentokil Initial, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Rentokil Initial’s Analyst Ratings
The stock isn’t pricing in a turnaround
Rentokil’s revenue has barely moved in three years, and analysts expect only about 4% growth a year through 2028…
Management still expects full-year profit in line with forecasts, so nothing in this update gives analysts a reason to cut.
The stock traded at 14x forward earnings at Wednesday’s close. That’s just above the five-year low of 13x it hit on Oct. 1 and far below its 21x average. Even after today’s jump, it’s closer to 15x…
Plus, the $200 million buyback is just under 2% of Rentokil’s market value. The sale of SOLitude Lake Management, which should bring in about $180 million in net cash, nearly covers it.
The one wrinkle: Edgecliffe-Johnson is retiring at the end of January for family health reasons. The search for a permanent successor has started.
My take: Rentokil finally has evidence that its North American plan is working, and at about 15x forward earnings, the stock prices in very little of it.
Of course, this is one month of data. Duffy has promised more detail on the investment and savings plans with the full-year results in February. That’s when we’ll see if September was the start of a trend.
So what is Rentokil stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Rentokil could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
