Rollins Q3: Revenue Up 6%, But Adjusted EPS Misses Again
Rollins grew Q3 revenue 6.2% to $1.09 billion but saw adjusted net income fall 3.1%, extending a pattern of profitability misses. At 27.5x forward earnings, the company's ability to fix a margin-compr
Rollins Q3: Revenue Up 6%, But Profits Shrink Again
NEW YORK, October 22 —
Three misses in four quarters have a pattern: Rollins, Inc. (ROL) grew Q3 2026 revenue 6.2% to $1.09 billion while adjusted operating income fell and adjusted net income declined 3.1%, a stock priced at 27.5x forward earnings punishing investors for a margin story moving in the wrong direction.
- Q3 adjusted EPS of $0.34 missed consensus by $0.01; adjusted operating margin contracted 140 basis points to 21.2%
- Commercial revenues grew 7.7% year over year; residential organic growth lagged at 2.3%, dragged by customer acquisition headwinds
- Shares fell 7.4% after hours on October 21; short interest stood at 9.3% of float heading into the print
The Gap That Matters
Rollins, which protects homes, hospitals, food facilities, and logistics operations from rodents, insects, and wildlife across three service lines, is delivering growth, just not profitable growth. Adjusted EBITDA declined 0.7% to $257 million on 6.2% revenue growth, with adjusted EBITDA margin compressing 170 basis points to 23.5%. A pest control franchise earning 52.4% gross margins on $3.92 billion in trailing revenue should be able to turn top-line momentum into earnings leverage. Instead, operating income of $231 million actually declined 0.6%. The business is growing bigger while earning less on each incremental dollar.
Where the Residential Business Is Breaking Down
Management identified weakness in consumer-initiated demand across traditional search, digital media, and inbound channels as the primary drag on residential customer acquisition. The numbers reflect it: residential organic revenue grew only 2.3%, against 4.9% total residential growth and 7.7% commercial growth, meaning acquisitions rather than organic wins are carrying the residential segment. Rollins says it is reassessing its marketing approach and taking concrete steps to improve acquisition spending effectiveness, language that typically precedes a quarter or two of continued pressure before any fix registers in margins. Commercial and termite operations are holding, but the residential segment is the growth engine for a franchise commanding a premium multiple.
| Ticker | Mkt cap | Fwd P/E | 52-wk |
|---|---|---|---|
| ROL | $16.9B | 27.6x | -41.1% |
| IEX | $16.7B | 23.5x | +39.8% |
| JKHY | $11.3B | 20.4x | -1.5% |
| MTD | $33.6B | 32.4x | +16.7% |
| VRSK | $26.3B | 23.1x | -18.1% |
| ALLE | $14.8B | 17.8x | -7.1% |
A 27.5x Multiple Priced for Execution Rollins Hasn't Delivered
The analyst consensus price target of $39.82 sits 13.7% above the current $35.02, but that gap requires Rollins to solve a customer-acquisition problem it has only just acknowledged while stabilizing a margin structure that has deteriorated for three consecutive reporting periods. The $502 million in trailing free cash flow confirms the underlying business remains cash-generative, the founding Rollins family's 38.5% ownership stake keeps the governance structure stable, but free cash flow alone doesn't justify a 27.5x forward earnings multiple when EPS is declining year over year. The specific number to watch next quarter: any recovery in residential organic growth above 4% alongside operating margin stabilization above 21.2% would be the first evidence the fix is working. Absent that, the premium looks exposed. Run the free Rollins, Inc. deep-dive → at Rollins, Inc.'s latest numbers.
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Frequently Asked Questions
Did Rollins beat or miss Q3 earnings?
Rollins missed on Q3 earnings, with adjusted EPS of $0.34 falling $0.01 short of consensus. This is the third earnings miss in four quarters, prompting a 7.4% after-hours stock decline on October 21.
Why did Rollins profits fall despite 6% revenue growth?
Adjusted operating margin contracted 140 basis points to 21.2%, while adjusted EBITDA margin compressed 170 basis points to 23.5%. The company is expanding revenue while earning less on each incremental dollar: adjusted operating income actually fell 0.6%.
What's causing the residential segment slowdown?
Management identified weakness in consumer-initiated demand across search, digital media, and inbound channels. Residential organic revenue grew only 2.3% versus 7.7% for commercial, meaning acquisitions are driving growth rather than organic customer wins.
What's Rollins' analyst price target?
Analyst consensus price target is $39.82, about 13.7% above the current $35.02. However, reaching that requires solving the customer-acquisition problem while stabilizing margins that have deteriorated for three consecutive quarters.
How much free cash flow did Rollins generate?
Rollins generated $502 million in trailing free cash flow, confirming the underlying business remains cash-generative. However, free cash flow alone doesn't justify a 27.5x forward earnings multiple when adjusted earnings are declining year over year.
Rollins reported Q3 2026 adjusted EPS of $0.34 and revenue of $1.09 billion, both below analyst estimates and its third earnings miss in four quarters, as adjusted operating income and EBITDA both declined despite 6.2% revenue growth — a profitability retreat in a business still priced at 27.5 times forward earnings.