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Service Corporation (SCI) Q2 Earnings Lag, Funeral Services Down
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Service Corporation International (SCI - Free Report) posted second-quarter 2024 results, with the top line increasing year over year and beating the Zacks Consensus Estimate. However, the bottom line declined year over year and missed the consensus mark.
Quarter in Detail
SCI posted adjusted earnings of 79 cents per share, which missed the Zacks Consensus Estimate of 86 cents. The metric declined from the year-ago quarter’s earnings of 83 cents. While increased gross profit from the cemetery segment and a lower share count contributed positively, these gains were more than offset by lower gross profit from funeral services, increased interest expenses and a higher tax rate.
Total revenues of $1,034 million increased 2% from $1,013.4 million reported in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $1,013.2 million. The revenue increase was partially driven by robust performance in the cemetery segment, resulting in a slight margin improvement over the same quarter last year. Toward the end of the quarter, SCI saw a greater-than-expected drop in funeral services, which, given its high fixed cost structure, affected quarterly performance.
The gross profit came in at $257.9 million, down from $261.5 million reported in the year-ago quarter. Corporate general and administrative costs were $39 million, increasing by $4.1 million year over year. The uptick was mainly associated with the timing of incentive compensation costs compared with the year-ago quarter’s tally.
The operating income of $220.8 million declined from $233.5 million reported in the year-ago quarter.
Service Corporation International Price and EPS Surprise
Consolidated Funeral revenues came in at $565.8 million in the quarter compared with $565.4 million reported in the year-ago period.
Total comparable funeral revenues dropped 0.9%. The downside was caused by a $6.6-million fall in core funeral revenues and a $7-million drop in non-funeral home preneed sales revenues, partially offset by a $6.8-million increase in core general agency revenues and other sources of revenues.
Core funeral revenues inched down 1.4%, mainly due to a 2.7% drop in the number of core funeral services performed, though this was partially offset by a 1.3% increase in core average revenue. Additionally, the core cremation rate rose by 60 basis points (bps) to 56.9%.
Non-funeral home preneed sales revenue dropped by 19.5%, primarily due to operational changes in certain markets affecting the timing of merchandise deliveries. An increase in general agency revenues partially mitigated this downside as the company transitioned from trust-funded to insurance-funded contracts.
Comparable preneed funeral sales production rose 2.3%. Core preneed sales production rose 4%, mainly due to increased contract velocity and higher sales averages. However, non-funeral home preneed sales production fell $2.4 million because of a reduction in contract velocity.
Comparable funeral gross profit came in at $99.4 million, down by $16.4 million. The gross profit contracted 280 bps to 17.8%. The downside was caused by a decline in revenues and the timing of incentive compensation costs relative to the same quarter last year.
Consolidated Cemetery revenues came in at $468.2 million, up from $448 million reported in the year-ago quarter.
Total comparable cemetery revenues rose 2.7%. The upside was driven by a $6.9-million rise in core revenues and a $5-million increase in other revenues. Core revenues increased mainly due to a $7.5-million rise in total recognized preneed revenues, which was driven primarily by growth in recognized merchandise and service preneed revenues.
Comparable preneed cemetery sales production dropped 1.9%, mainly due to a decline in large sales. This was somewhat offset by a slight increase in core preneed cemetery sales production.
Comparable cemetery gross profit came in at $151.1 million, up $5.1 million. The gross profit margin expanded by 30 bps to 32.9%. This growth was mainly due to the higher revenue mentioned earlier. However, it was partially offset by increased maintenance costs and the timing of incentive compensation expenses compared with the same quarter last year.
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $184.4 million, long-term debt of $4,688.7 million and total equity of $1,539.7 million.
Net cash from operating activities amounted to $417 million during the six months ended Jun 30, 2024. During the same period, the company incurred total capital expenditures of $175.9 million.
Image Source: Zacks Investment Research
Guidance
Service Corpor expects 2024 earnings per share (EPS), excluding special items, in the range of $3.50-$3.80. We note that the company’s earnings came in at $3.47 per share in 2023. Since the number of funeral services performed during the second quarter fell short of the company’s expectations, management anticipates earnings to be at the lower end of its guidance.
Net cash provided by operating activities (excluding special items and cash taxes) is anticipated in the range of $935-$985 million. Net cash provided by operating activities (excluding special items) is expected in the range of $900-$960 million.
Management expects total maintenance capital expenditures of $325 million for 2024.
The stock has increased 7.4% in the past three months compared with the industry’s increase of 14.6%.
Some Better-Ranked Staple Bets
BRF (BRFS - Free Report) is engaged in raising, producing and slaughtering poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BRF’s current financial-year sales and earnings suggests growth of 7.5% and 210%, respectively, from year-ago reported figures.
Treehouse Foods (THS - Free Report) is a manufacturer of packaged foods and beverages. The company currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Treehouse Foods’ current financial-year sales and earnings indicates a decline of 1.6% and 8.5%, respectively, from the prior-year reported level. THS has a negative trailing four-quarter average earnings surprise of 4.5%.
Philip Morris (PM - Free Report) , a tobacco company, has a trailing four-quarter earnings surprise of 1.8%, on average. PM currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Philip Morris’ current financial-year sales and earnings indicates growth of 5.8% and 6.3%, respectively, from prior-year reported levels.
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Service Corporation (SCI) Q2 Earnings Lag, Funeral Services Down
Service Corporation International (SCI - Free Report) posted second-quarter 2024 results, with the top line increasing year over year and beating the Zacks Consensus Estimate. However, the bottom line declined year over year and missed the consensus mark.
Quarter in Detail
SCI posted adjusted earnings of 79 cents per share, which missed the Zacks Consensus Estimate of 86 cents. The metric declined from the year-ago quarter’s earnings of 83 cents. While increased gross profit from the cemetery segment and a lower share count contributed positively, these gains were more than offset by lower gross profit from funeral services, increased interest expenses and a higher tax rate.
Total revenues of $1,034 million increased 2% from $1,013.4 million reported in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $1,013.2 million. The revenue increase was partially driven by robust performance in the cemetery segment, resulting in a slight margin improvement over the same quarter last year. Toward the end of the quarter, SCI saw a greater-than-expected drop in funeral services, which, given its high fixed cost structure, affected quarterly performance.
The gross profit came in at $257.9 million, down from $261.5 million reported in the year-ago quarter. Corporate general and administrative costs were $39 million, increasing by $4.1 million year over year. The uptick was mainly associated with the timing of incentive compensation costs compared with the year-ago quarter’s tally.
The operating income of $220.8 million declined from $233.5 million reported in the year-ago quarter.
Service Corporation International Price and EPS Surprise
Service Corporation International price-eps-surprise | Service Corporation International Quote
Segment Discussion
Consolidated Funeral revenues came in at $565.8 million in the quarter compared with $565.4 million reported in the year-ago period.
Total comparable funeral revenues dropped 0.9%. The downside was caused by a $6.6-million fall in core funeral revenues and a $7-million drop in non-funeral home preneed sales revenues, partially offset by a $6.8-million increase in core general agency revenues and other sources of revenues.
Core funeral revenues inched down 1.4%, mainly due to a 2.7% drop in the number of core funeral services performed, though this was partially offset by a 1.3% increase in core average revenue. Additionally, the core cremation rate rose by 60 basis points (bps) to 56.9%.
Non-funeral home preneed sales revenue dropped by 19.5%, primarily due to operational changes in certain markets affecting the timing of merchandise deliveries. An increase in general agency revenues partially mitigated this downside as the company transitioned from trust-funded to insurance-funded contracts.
Comparable preneed funeral sales production rose 2.3%. Core preneed sales production rose 4%, mainly due to increased contract velocity and higher sales averages. However, non-funeral home preneed sales production fell $2.4 million because of a reduction in contract velocity.
Comparable funeral gross profit came in at $99.4 million, down by $16.4 million. The gross profit contracted 280 bps to 17.8%. The downside was caused by a decline in revenues and the timing of incentive compensation costs relative to the same quarter last year.
Consolidated Cemetery revenues came in at $468.2 million, up from $448 million reported in the year-ago quarter.
Total comparable cemetery revenues rose 2.7%. The upside was driven by a $6.9-million rise in core revenues and a $5-million increase in other revenues. Core revenues increased mainly due to a $7.5-million rise in total recognized preneed revenues, which was driven primarily by growth in recognized merchandise and service preneed revenues.
Comparable preneed cemetery sales production dropped 1.9%, mainly due to a decline in large sales. This was somewhat offset by a slight increase in core preneed cemetery sales production.
Comparable cemetery gross profit came in at $151.1 million, up $5.1 million. The gross profit margin expanded by 30 bps to 32.9%. This growth was mainly due to the higher revenue mentioned earlier. However, it was partially offset by increased maintenance costs and the timing of incentive compensation expenses compared with the same quarter last year.
Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $184.4 million, long-term debt of $4,688.7 million and total equity of $1,539.7 million.
Net cash from operating activities amounted to $417 million during the six months ended Jun 30, 2024. During the same period, the company incurred total capital expenditures of $175.9 million.
Image Source: Zacks Investment Research
Guidance
Service Corpor expects 2024 earnings per share (EPS), excluding special items, in the range of $3.50-$3.80. We note that the company’s earnings came in at $3.47 per share in 2023. Since the number of funeral services performed during the second quarter fell short of the company’s expectations, management anticipates earnings to be at the lower end of its guidance.
Net cash provided by operating activities (excluding special items and cash taxes) is anticipated in the range of $935-$985 million. Net cash provided by operating activities (excluding special items) is expected in the range of $900-$960 million.
Management expects total maintenance capital expenditures of $325 million for 2024.
The stock has increased 7.4% in the past three months compared with the industry’s increase of 14.6%.
Some Better-Ranked Staple Bets
BRF (BRFS - Free Report) is engaged in raising, producing and slaughtering poultry and pork for processing, production and sale of fresh meat, processed products, pasta, margarine, pet food and other products. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BRF’s current financial-year sales and earnings suggests growth of 7.5% and 210%, respectively, from year-ago reported figures.
Treehouse Foods (THS - Free Report) is a manufacturer of packaged foods and beverages. The company currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Treehouse Foods’ current financial-year sales and earnings indicates a decline of 1.6% and 8.5%, respectively, from the prior-year reported level. THS has a negative trailing four-quarter average earnings surprise of 4.5%.
Philip Morris (PM - Free Report) , a tobacco company, has a trailing four-quarter earnings surprise of 1.8%, on average. PM currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Philip Morris’ current financial-year sales and earnings indicates growth of 5.8% and 6.3%, respectively, from prior-year reported levels.