Shares of Rentokil Initial PLC (LON:RTO) rose on Tuesday following a buy-side upgrade from Goldman Sachs, which moved the stock from Neutral to Buy on the expectation that a sustained recovery in North American organic growth could trigger a re-rating.
In London trading, Rentokil shares gained 2.1% to 453.5 pence, outpacing a little-changed FTSE 100.
Goldman Sachs increased its 12-month price target on the company to 590 pence from 515 pence, a level that the bank says implies roughly 33% upside from the stock's prior close. The upgrade reflects Goldman Sachs' view that improved execution in Rentokil's largest market - North America - should enable a steady rebuild of organic growth through 2027 after several years of disruption tied to the Terminix acquisition.
The brokerage noted that organic growth in North America has picked up since the third quarter of 2025. It highlighted ongoing investments in branch expansion, enhanced local sales execution, customer retention initiatives and marketing as key supports for further progress. Goldman Sachs now expects the North American business to reach mid-single-digit organic growth by 2027, narrowing the performance gap with industry peer Rollins.
Goldman Sachs also said that a pause in major integration work related to Terminix has reduced operational disruption. That pause, the bank said, allows Rentokil management to concentrate on execution while margins expand gradually. The brokerage projects group EBITA margins of 17.1% in 2027, driven by stronger revenue growth alongside continued cost-saving actions.
Alongside the upgrade and higher price target, Goldman Sachs modestly raised its earnings forecasts for 2027 and 2028. The bank described the recent pullback in Rentokil shares as providing an attractive entry point given improving industry fundamentals and the company's strengthening operational performance. It also expects ongoing deleveraging to underpin the potential for future bolt-on acquisitions in the fragmented pest-control market.
Summary
Goldman Sachs upgraded Rentokil to Buy and lifted its 12-month target to 590 pence, citing a recovery in North American organic growth since Q3 2025, a reduction in integration disruption from the Terminix deal, expected margin expansion to 17.1% by 2027, and modestly higher earnings forecasts for 2027 and 2028.
Key points
- Goldman Sachs upgraded Rentokil to Buy from Neutral and raised its 12-month price target to 590 pence (from 515 pence), implying about 33% upside from the prior close.
- The bank sees North American organic growth improving since Q3 2025 and expects the business to reach mid-single-digit organic growth by 2027, narrowing the gap with Rollins.
- Pause in major Terminix integration work has eased operational disruption, supporting a projected rise in group EBITA margins to 17.1% in 2027 and modestly higher earnings forecasts for 2027 and 2028.
Risks and uncertainties
- Renewed disruption from further integration activity related to the Terminix acquisition could impede execution and growth - a direct operational risk to the services sector.
- If North American organic growth does not continue to strengthen as anticipated, Rentokil may fail to achieve the mid-single-digit growth the broker forecasts for 2027, affecting revenue and margin outlooks.
- Market volatility and share price pullbacks could alter the perceived attractiveness of entry points despite the broker's views; this is a financial markets risk.
This article focuses on Rentokil's outlook and the implications of Goldman Sachs' reassessment for the company's growth trajectory, margins and potential for future acquisitions in the pest-control market.