Rollins (ROL) posted weaker-than-expected Q2 results and its weaker Residential segment trends decreased visibility around a recovery and reacceleration in organic growth, BofA Securities said in a note Thursday.
Rollins' Residential segment growth of 3.6% was below expectations and was "driven by weaker lead generation and possibly more volatile consumer behavior and competition," the note said.
The narrative seems to have now moved beyond weather-related disruptions, and the company's management is now also pointing to factors like "softer demand within consumer-initiated lead channels," BofA said.
The investment firm noted, however, that Rollins' management indicated improvements in lead generation in July, but BofA said that it is awaiting "further proof points before calling an inflection."
"While lead trends improved into July, demand remains choppier and difficult to predict," the note said.
BofA also said that "weakness was not uniform" as the company's Commercial segment and ancillary services stayed relatively resilient with organic growth.
BofA downgraded Rollins' rating to underperform from buy and cut the company's price target to $35 from $55.
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