Q2 Commercial Pest Revenue Estimates Likely to be Cut by ~25% by Wall Street; ServiceMaster’s Black Wednesday – Pest Control Daily Market Update

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Given the movement in the markets and the constant requests that we are receiving, Potomac will be providing a brief daily update for the time being on the pest control public and private market news.

1. Wall Street to Cut Commercial Pest Control Estimates Significantly

After speaking with several prominent wall street analysts, we expect to see some serious cuts in commercial revenue estimates for firms like Rollins and ServiceMaster. I wouldn’t be surprised if we see Q2 2020 commercial revenue estimates down by a full 25%, maybe more.

As businesses around the world shut down, commercial pest will take a significant hit in the near term. The good news is, we aren’t hearing much about cancellations. Instead, customers are putting services on pause while they temporarily closed. This only becomes of serious problem if these customers go out of business, and right now the hope is that this is going to be a short-term blip.

2. ServiceMaster’s Black Wednesday – SERV Falls More in One Day (23.6%) Than the Dow in the 1987 Stock Market Crash (22.6%)

Well, Memphis is definitely the undisputed home of the blues. But I’m not sure why.

In a spectacular day of trading, ServiceMaster was down almost 30% in intraday trading, closing down 23.6% on the day. This one-day decline in ServiceMaster’s stock was greater than the Dow’s decline on Black Monday, 1987. The stock briefly touched $17.63 per share today, down over 60% from it’s 52-week high of $58.78. The stock is currently trading at 2014 levels (the year ServiceMaster went public).

If anything, SERV should be performing well relative to its peers. It’s a residential business (rather than commercial) and it’s already been beaten up badly over the last six months. 

My gut tells me that there were some big blocks of SERV sold today by investors in a run for cash. Given where SERV has been trading recently, I think investors reasoned that it “won’t be increasing dramatically in the near term, so what the hell?”

3. Progress Being Made on Essential Services at the State Level

We’ve heard that there has been substantial progress made in a variety of US states to classify pest control as an essential service. From two separate sources we’ve learned that the state of Georgia has or will imminently recognize pest control as an essential service and not subject to potential closures. 

In addition, the Pennsylvania Department of Agriculture yesterday issued guidance stating: “Essential businesses for a safe and accessible food supply include farms, greenhouses and vegetable plants, orchards, pest management services, feed mills and ag supply businesses…” You can read the release here.

Here is what we are hearing from people making progress at the state and local level:

  • Contact your governor’s office as well as your state department of agriculture
  • Be extremely polite and professional — no whining about you losing business, this is about protecting people, property, and the food supply
  • Have specific examples ready as to how pest management mitigates the spread of disease
  • For those of you close to state capitals, dust off your finest suit and go see the executive branch in person
  • Be in touch with the NPMA and state associations as they can assist you in your efforts

Progress is being made and now is the time to double-down on these efforts. Potomac has been in contact with the executive branch in two states and we are doing our best to make sure that these politicians understand the significant impact our industry has on health and safety.

4. Prison

Might be where you will be visiting me after I kill my wife due to this quarantine #TheQuarantineWithYourWifeMightBeWorseThanTheVirus

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About Paul Giannamore

Managing Director at The Potomac Company where I head the firm's strategy consulting and investment banking practice focused on the structural pest control and integrated facilities services industries. I write the Pest Control M&A Weekly Commentary and The Potomac Pest Control Executive, newsletters read by thousands pest control professionals in scores of countries (you can subscribe to it below). In a nutshell, I do two things: (1) advise shareholders and senior management of pest management firms on creating value in their businesses, (2) advise sellers on the sale of their businesses. Based in Geneva, Switzerland, I'm a graduate of Cornell University, and I speak Italian, Spanish, Arabic and broken French. Join me on LinkedIn