Rentokil Initial PLC (LSE:RTO) was one of the top FTSE 100 risers in early trading, up 1.8%, after RBC Capital Markets summed up the situation as the pest control group continues with the integration of Terminix (TMX), its major North American acquisition from late 2022.
The shares have been "very volatile", analysts at the London arm of the Canadian bank said, after the company issued a profit warning last autumn due to softer US trading.
First-half results due on 25 July should be in line with the market's expectations, said RBC analyst Andrew Brooks, in a note where he updated earnings forecasts to incorporate currency swings (-1% to -2%).
Organic revenue growth of 3.2% is forecast for the first half, versus 3.1% in the first quarter, with 1.8% in North America improving from 1.5% in Q1.
The consensus forecast for adjusted profit before tax is £376.6 million.
"The key focus for investors will be the NA organic run-rate, where we expect some acceleration on Q1 to 2.1% given the sales and marketing investment and the better digital leads seen in April.
"We expect execution on the plans to reinvigorate organic growth to lead to an acceleration in organic growth through the year (Q1: 1.5%, Q2: 2.1%, Q3: 3.0%, Q4: 3.5%), as the sales and marketing investment, incentive changes and sales staff retention improvements kick-in," Brooks said, with growth helped by easier comparative periods in the third and fourth quarters.
The recent investment by billionaire activist Nelson Peltz was noted by the analyst but he said he believes "it changes little" as "we believe RTO has the correct strategy in place, with the key issue being the execution on the NA organic growth plans and the TMX integration".
Brooks said he continues to see significant upside, "although clearly there is still lots to do", with peak branch integration at TMX still 12 months away.
"Short term, we see re-rating potential as NA growth accelerates and as confidence in the story rebuilds. Longer term, we continue to believe RTO is very well positioned within a defensive, good growth industry (see here), we expect management to execute on the TMX integration, and we see re-rating potential as organic growth, cashflow, ROIC and leverage improve and the risk profile reduces."