Is Rentokil Initial plc (RTO) a Well Positioned Business?
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Aristotle Capital Management, LLC, an investment management company, released its “International Equity Strategy” third quarter 2024 investor letter. A copy of the letter can be downloaded here. During the quarter global equity markets reached record highs. The MSCI ACWI Index surged 6.61%, while the Bloomberg Global Aggregate Bond Index rallied 6.98%. Aristotle Capital International Equity returned 10.97% gross of fees (10.82% net of fees) in the third quarter outperforming the MSCI EAFE Index’s 7.26% return, and the MSCI ACWI ex USA Index’s 8.06% return. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Aristotle Capital International Equity Strategy highlighted stocks like Rentokil Initial plc (NYSE:RTO) in the third quarter 2024 investor letter. Rentokil Initial plc (NYSE:RTO) is a route-based services provider. The one-month return of Rentokil Initial plc (NYSE:RTO) was -6.48%, and its shares lost 35.54% of their value over the last 52 weeks. On October 14, 2024, Rentokil Initial plc (NYSE:RTO) stock closed at $23.54 per share with a market capitalization of $11.824 billion.
Aristotle Capital International Equity Strategy stated the following regarding Rentokil Initial plc (NYSE:RTO) in its Q3 2024 investor letter:
"Rentokil Initial plc (NYSE:RTO), the U.K.-based pest control and hygiene services company, was one of the largest detractors for the quarter. In an unscheduled update, management provided a revised outlook for the North American pest control business, with 2024 revenue growth from the region now expected to be just 1%, a significant reduction from the prior guidance of 2%-4%. The company is experiencing temporary disruption due to the ongoing integration of Terminix into Rentokil’s existing branch network, with recent investments in sales and marketing requiring additional time to deliver results. However, while these integration efforts are weighing on short-term results, we believe they are precisely the foundation of Rentokil’s long-term value proposition. Once integration challenges are resolved, the combination should provide operational synergies through scale efficiencies and improved density in key markets, paving the way for a faster consolidation of the U.S. pest control industry and positioning the company to capture even more market share in the coming years. This “Right Way 2” operational plan underscores management’s focus on increasing customer retention and driving productivity gains via technology and data utilization. The ongoing branch integration and market densification initiatives represent key catalysts already in motion. Given its scale, operational excellence and strategic acquisitions, we believe Rentokil is well positioned to deliver both revenue growth and margin expansion over time."
