Berenberg upgrades Rentokil to 'hold'

Analysts at Berenberg upgraded pest control services provider Rentokil from 'sell' to 'hold' on Tuesday and raised their target price on the stock from 440.0p to 510.0p, stating risks faced by the firm were balanced "for now".

Berenberg initiated coverage on Rentokil in February with the view that the competitive environment in US pest control would not allow for sufficient pricing increases to offset inflationary cost pressures.

However, the German bank said that this has not transpired, with pricing remaining "resilient" through the 2021 trading year.

"While we still believe that growth through M&A will become increasingly difficult in years to come, the strong performance and M&A spend guidance in FY 2021 should support sentiment for now," said the analysts.

"As the resilience of pricing removes a key catalyst for our Sell case and consensus estimates for FY 2021 appear achievable, the risk/reward is balanced in our view and we upgrade to 'hold'."