Service Corporation International ((SCI)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Service Corporation International (SCI) painted a mixed picture for investors. While the company reported strong growth in cemetery revenue and preneed sales production, it faced challenges in the funeral segment, including a decline in revenue and increased costs. Additionally, a higher tax rate negatively impacted earnings per share, contributing to the overall sentiment of cautious optimism.
Increased Adjusted Earnings Per Share
SCI reported a notable increase in adjusted earnings per share, which rose by more than 10% to reach $0.87, compared to $0.79 in the prior year period. This improvement highlights the company’s ability to enhance profitability despite facing some operational challenges.
Cemetery Revenue Growth
The company experienced a significant boost in cemetery revenue, with comparable figures increasing by $31 million, or almost 7%. This growth was primarily driven by a $27 million increase in total recognized preneed revenue, underscoring the strength of SCI’s cemetery operations.
Strong Preneed Sales Production
Preneed sales production in the cemetery segment saw impressive growth, increasing by $30 million or nearly 10%. Large sales, in particular, grew by an impressive 19%, indicating robust demand and effective sales strategies in this area.
Positive Cash Flow and Capital Investment
SCI generated an adjusted operating cash flow of $268 million during the quarter, which allowed the company to invest $140 million into existing locations and acquisitions. This strategic allocation of capital reflects SCI’s commitment to long-term growth and expansion.
Decline in Funeral Revenue
In contrast to the positive trends in the cemetery segment, SCI’s funeral revenue experienced a slight decline of almost $2 million, or less than 1%. The number of core funeral services performed decreased by 3.5%, highlighting the challenges faced in this segment.
Higher Tax Rate Impact
The earnings per share were negatively affected by a higher tax rate, which resulted in a $0.02 decline. This was due to the nondeductibility of certain tax benefits, impacting the company’s overall profitability.
Non-funeral Home Preneed Sales Decrease
SCI reported a decrease in non-funeral home preneed sales revenue by $4.6 million. This decline was primarily attributed to the decision to stop delivering preneed merchandise at the time of sale, which affected revenue recognition.
Higher Funeral Selling Costs
The funeral segment faced increased selling costs, leading to a $9.5 million decrease in gross profit. The gross profit percentage declined by 170 basis points, reflecting the impact of higher selling costs and a moderate increase in fixed costs.
Forward-Looking Guidance
Looking ahead, SCI provided detailed guidance for the remainder of the fiscal year. The company expects adjusted earnings per share for the full year 2025 to be in the range of $3.80 to $3.90. Additionally, SCI slightly raised its cash flow outlook due to stronger working capital trends and anticipated lower cash taxes. The company is projecting long-term earnings per share growth within an 8% to 12% range, supported by favorable trends in funeral volume, average revenue per funeral service, and preneed cemetery sales.
In conclusion, Service Corporation International’s earnings call highlighted a mixed performance, with strong growth in cemetery operations offset by challenges in the funeral segment. The company’s forward-looking guidance suggests optimism for continued growth, driven by strategic investments and favorable market trends. Investors will be keen to see how SCI navigates these challenges and capitalizes on its growth opportunities in the coming quarters.