March 11, 2009 - Rollins, Inc. (ROL-NYSE) through its subsidiaries, provides pest and termite control services against termite damage, rodents, and insects. It serves homes and businesses, including hotels, food service establishments, food manufacturers, retailers, and transportation companies in North America, Mexico, Central America, the Caribbean, the Middle East, and Asia.

Rollins owns and operates Orkin Exterminating where the Orkin man lives. He's been busy as lots of people called him to get rid of bugs and vermin. In the last quarter of 2008, earnings were up 8% compared to the same quarter in 2007. All of 2008 saw the bottom line improve by 8%. When there was a recession for the whole year, that's an impressive result.

Even with slow housing sales (houses need to be "tented" when sold to exterminate insects, mostly termites), the company should continue to see good demand from commercial enterprises. Pest control isn't an item that can be arbitrarily eliminated from corporate expenses. Analysts see sales growth of 1.7% in 2009 and 1.9% in 2010. Total revenues for 2008 were $1.02 billion. Look for earnings to increase 72 cents a share, up from 69 cents in 2008. Then in 2010 go to 81 cents a share. For the first quarter of 2009, analysts expect 14 cents a share, the same as the first quarter of last year. For the second quarter, expect 24 cents, up from 23 cents last year.

Another growth item for the company is its dividend. Management recently announced a new quarterly dividend of $0.07 a share. Rollins has increased its payout rate by 12% or more for seven consecutive years.

The company has a strong balance sheet with only 1% of its capital base coming from debt. That gives it plenty of flexibility. It may go shopping for strategic acquisitions this year, something it's done quite a bit in the past. The timing may be perfect as many other local or regional exterminators may want to sell, especially if they're only providing services to homes. Look for analysts to up their sales and earnings estimates if there is a purchase.

The company is doing very well compared to most in this difficult economic environment. It's feeling the loss of revenues from fewer home sales. But once the economy shows recovery and housing sales pick up, this stock should show some bounce. Last year it hit an all-time high of $22.50 (price is stock split adjusted....there was a 3 for 2 stock split at the end of 2007). When the market cratered in October/November of last year, the stock hit $9.37 before it started up again.

More numbers: Market cap is $1.47 billion. Forward P/E is 18. Price to Book is 6.54. Operating margin is 11.13% and Profit margin is 6.75%. Return on Equity was a remarkable 29.84% for the last 12 months. Book Value is $2.28. Total cash is $13.72 million. Total debt is $65.62 million. Current ratio is .43. There are 100.47 million shares outstanding, but the float is only 40.77 million. Insiders own 58.7% of the stock. Institutions own 36%. The dividend is 28 cents a year for a yield of 1.7%. The payout takes 36% of earnings.

Check out Rollins if you're interested in a solid company that has a recession proof business model. While it isn't growing quickly, it is growing. Something that very few other companies can say currently.

Company Web site: www.rollins.com

- Ted Allrich