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Rentokil Initial PLC (LSE:RTO) has recently faced challenges, with Deutsche Bank analysts revising their expectations downward following the company's warning about sluggish sales in North America. This adjustment in forecasts reflects a significant shift in the company's projected financial performance.
Deutsche Bank has lowered its pre-tax profit estimate for Rentokil to £691 million for the year, marking an 11% reduction from previous forecasts. The downgrade stems from Rentokil's recent announcement of weaker-than-expected sales in North America and an additional £50 million in unforeseen costs. The company has indicated that full-year profits for 2024 are likely to be around £700 million, a drop from the £766 million reported last year. Deutsche Bank has also cautioned that this figure could be even lower, highlighting ongoing concerns about the company's performance.
The challenges are compounded by potential integration issues related to Rentokil's acquisition of Terminix in 2022. The anticipated benefits from this acquisition have been slower to materialize than originally projected. Deutsche Bank analysts have pointed out the possibility of further disruptions as Rentokil continues to integrate Terminix and realize the expected synergies.
In light of these developments, Deutsche Bank has reduced its share price target for Rentokil from 550p to 465p. Despite this adjustment, the analysts have maintained a ‘buy’ rating on the stock. The company's share price reacted sharply to the news, plunging 20% to 380p on Wednesday. The decline continued into Friday, with shares falling an additional 4.3% to 364.9p.
This recent turmoil underscores the broader difficulties Rentokil is facing, including integration challenges and unexpected cost pressures. The company's struggle to meet sales expectations in a key market and the slower-than-anticipated benefits from its major acquisition have led to a reassessment of its financial outlook. As Rentokil navigates these hurdles, stakeholders will be watching closely to see how the company addresses these issues and works to stabilize its performance in the coming months.