ServiceMaster (SERV) Termite Damage Claims is Close to Being a Tailwind, William Blair Reiterates Outperform

William Blair analyst Tim Mulrooney reiterated an Outperform rating on ServiceMaster (NYSE: SERV) on the belief that 2020 will be the peak year for termite damage claims for 3 reasons:

1) the termite re-treatment program is expected to be complete by year-end, which should mitigate future termite claims in the Mobile, Alabama, region

2) nonlitigated cases are down materially year-over-year, which should serve as a directional leading indicator for future litigated cases

3) there are fewer customers in the higher-cost Mobile region than there were several years ago with the customer count down nearly 60% from 2018

The analyst stated "we would expect the costlier cases (higher potential settlement amount or higher percentage chance of winning) to be prioritized by the legal representatives who are prosecuting claims in the Mobile region, which should naturally drive down claims expense over time. If our expectation proves to be correct, then termite claims expense would become a tailwind to EBITDA growth beginning in 2021".

For an analyst ratings summary and ratings history on ServiceMaster click here. For more ratings news on ServiceMaster click here.

Shares of ServiceMaster closed at $39.57 yesterday.

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