Rentokil shares climb after Jefferies upgrades stock to Buy

Shares of Rentokil Initial PLC (LSE:RTO) rose 4.1% on Thursday after Jefferies upgraded the pest control group to Buy from Hold and lifted its price target to 540 pence from 475 pence.

The stock moved higher following the analyst upgrade, which pointed to a strategic turning point that could allow the company to resume sustained growth. Jefferies analysts expect volumes in North America to stabilize by the end of 2026, potentially bringing to a close nearly three years of market share declines.

The brokerage projects group EBITA to grow at a compound annual rate of about 7% between fiscal 2026 and 2028. Jefferies also highlighted that Rentokil’s North American pest control operations are currently valued at roughly 17 times EV/EBITA, compared with around 25 times for comparable U.S. service network companies.

According to Jefferies estimates, volumes in Rentokil’s North American Pest Services segment during the fourth quarter of 2025 were about 5% lower than in 2022, while the broader market likely expanded by roughly 5%. The analysts linked the decline to branch closures and route consolidation following the company’s 2022 acquisition of Terminix.

However, the firm believes the company’s recent strategic shift is beginning to reverse that trend, supported by net branch openings and reduced disruption for front-line operations. Jefferies expects North American margins to reach 19.5% in fiscal 2027—below the company’s long-term goal of more than 20%, but still higher than the roughly 17% margin that analysts believe is currently reflected in the share price.

The upgrade reflects Jefferies’ view that Rentokil could accelerate growth under its new leadership without requiring significant additional spending, as the cost base in North America appears already well developed despite recent operational challenges.

Jefferies also increased its earnings-per-share forecasts by about 5% to 6%. The updated price target is based on a valuation that combines a discounted cash flow analysis with a sum-of-the-parts approach, weighted equally.