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Service Corporation (SCI) Q1 Earnings Lag Estimates, Down Y/Y
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Service Corporation International (SCI - Free Report) posted first-quarter 2020 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Further, earnings declined year over year. Sales were up slightly year over year owing to improved performance in the funeral segment.
Given the current situation related to the coronavirus outbreak and its unpredictable impact on economic activities, Service Corporation has withdrawn its 2020 guidance. The company expects the coronavirus pandemic to negatively impact its adjusted earnings per share in 2020. Nevertheless, it is undertaking a number of cost-control measures to minimize these negative impacts.
Also, management anticipates adjusted operating cash flow to be less impacted than adjusted earnings per share on the back of continued cash collection from preneed installment sales, deferred taxes as well as reduced costs and capital expenditures.
Service Corporation International Price, Consensus and EPS Surprise
Service Corporation reported adjusted earnings of 43 cents per share, which lagged the Zacks Consensus Estimate of 45 cents. Further, the bottom line fell 8.5% from the year-ago quarter’s figure due to reduced gross profit stemming from lower preneed cemetery property revenues induced by the coronavirus pandemic. Nevertheless, lower corporate general and administrative costs along with reduced interest expenses offer some respite.
Total revenues of $803 million inched up 0.6% from $798.2 million in the year-ago quarter, backed by increased funeral revenues. Moreover, the figure beat the consensus mark of $793 million.
Corporate general and administrative costs fell 26% to $31.8 million. Additionally, the company’s interest costs fell 6.4% to $44.4 million in the reported quarter.
Segment Discussion
Comparable Funeral revenues inched up 1.6% year over year, backed by improved preneed revenues along with higher core revenues. Core revenues rose on the back of increased funeral services performed and higher average revenue per service conducted. Recognized preneed revenues improved 4.2%.
Comparable preneed funeral sales production declined 7.2% due to fall in preneed production in non-funeral home channel and an increase in core funeral locations.
Comparable funeral gross profit declined 2.7% to $102.9 million. Also, the gross profit margin contracted 90 basis points (bps) to 20.7% due to increased employee-related expenses and rise in doubtful account reserves.
Comparable Cemetery revenues fell 2.4% year over year due to decline in recognized preneed property revenues. This was partly offset by increase in recognized preneed merchandise and service revenues along with higher atneed sales. Comparable preneed cemetery sales production declined 10.5%.
Comparable cemetery gross profit declined 12.8% to $75.3 million and the respective margin contracted 300 bps to 25.3%. The decline can be attributable to reduced cemetery sales as well as higher employee-related costs, increased maintenance expenses and an increase in doubtful account reserves.
Other Financial Details
The company ended the quarter with cash and cash equivalents of $176.3 million, long-term debt of $3,535.8 million and total equity of $1,751.1 million.
Net cash provided by operating activities amounted to $180 million in the quarter compared with $184.9 million in the prior-year quarter. During the first quarter, the company incurred capital expenditures of $52.3 million.
Price Performance
We note that shares of the Zacks Rank #3 (Hold) company have lost 17.7% in the past three months compared with the industry’s decline of 25.3%.
General Mills (GIS - Free Report) has a long-term earnings growth rate of 7.5% and a Zacks Rank #2.
Conagra Brands (CAG - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2.
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Service Corporation (SCI) Q1 Earnings Lag Estimates, Down Y/Y
Service Corporation International (SCI - Free Report) posted first-quarter 2020 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Further, earnings declined year over year. Sales were up slightly year over year owing to improved performance in the funeral segment.
Given the current situation related to the coronavirus outbreak and its unpredictable impact on economic activities, Service Corporation has withdrawn its 2020 guidance. The company expects the coronavirus pandemic to negatively impact its adjusted earnings per share in 2020. Nevertheless, it is undertaking a number of cost-control measures to minimize these negative impacts.
Also, management anticipates adjusted operating cash flow to be less impacted than adjusted earnings per share on the back of continued cash collection from preneed installment sales, deferred taxes as well as reduced costs and capital expenditures.
Service Corporation International Price, Consensus and EPS Surprise
Service Corporation International price-consensus-eps-surprise-chart | Service Corporation International Quote
Q1 in Detail
Service Corporation reported adjusted earnings of 43 cents per share, which lagged the Zacks Consensus Estimate of 45 cents. Further, the bottom line fell 8.5% from the year-ago quarter’s figure due to reduced gross profit stemming from lower preneed cemetery property revenues induced by the coronavirus pandemic. Nevertheless, lower corporate general and administrative costs along with reduced interest expenses offer some respite.
Total revenues of $803 million inched up 0.6% from $798.2 million in the year-ago quarter, backed by increased funeral revenues. Moreover, the figure beat the consensus mark of $793 million.
Corporate general and administrative costs fell 26% to $31.8 million. Additionally, the company’s interest costs fell 6.4% to $44.4 million in the reported quarter.
Segment Discussion
Comparable Funeral revenues inched up 1.6% year over year, backed by improved preneed revenues along with higher core revenues. Core revenues rose on the back of increased funeral services performed and higher average revenue per service conducted. Recognized preneed revenues improved 4.2%.
Comparable preneed funeral sales production declined 7.2% due to fall in preneed production in non-funeral home channel and an increase in core funeral locations.
Comparable funeral gross profit declined 2.7% to $102.9 million. Also, the gross profit margin contracted 90 basis points (bps) to 20.7% due to increased employee-related expenses and rise in doubtful account reserves.
Comparable Cemetery revenues fell 2.4% year over year due to decline in recognized preneed property revenues. This was partly offset by increase in recognized preneed merchandise and service revenues along with higher atneed sales. Comparable preneed cemetery sales production declined 10.5%.
Comparable cemetery gross profit declined 12.8% to $75.3 million and the respective margin contracted 300 bps to 25.3%. The decline can be attributable to reduced cemetery sales as well as higher employee-related costs, increased maintenance expenses and an increase in doubtful account reserves.
Other Financial Details
The company ended the quarter with cash and cash equivalents of $176.3 million, long-term debt of $3,535.8 million and total equity of $1,751.1 million.
Net cash provided by operating activities amounted to $180 million in the quarter compared with $184.9 million in the prior-year quarter. During the first quarter, the company incurred capital expenditures of $52.3 million.
Price Performance
We note that shares of the Zacks Rank #3 (Hold) company have lost 17.7% in the past three months compared with the industry’s decline of 25.3%.
Don’t Miss These Solid Food Stocks
Campbell Soup Company (CPB - Free Report) has a long-term earnings growth rate of 7.2% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
General Mills (GIS - Free Report) has a long-term earnings growth rate of 7.5% and a Zacks Rank #2.
Conagra Brands (CAG - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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