Service Corporation International Signals Resilient 2026 Outlook

Service Corporation International ((SCI)) has held its Q1 earnings call. Read on for the main highlights of the call.

Service Corporation International’s latest earnings call struck a cautiously positive tone, as management highlighted resilient cash generation, strong cemetery performance, and healthy preneed demand even as funeral volumes fell sharply. Executives framed the current softness in mortality as cyclical, stressing disciplined cost control, solid balance sheet strength, and confidence in a back-half recovery that supports reaffirmed full-year guidance.

Adjusted EPS Edges Up Despite Volume Drag

Adjusted EPS inched up to $0.97 from $0.96 a year ago, showing earnings resilience in the face of weaker funeral activity. Management stressed that if funeral volumes had simply been flat, EPS would have been roughly $1.12, implying about 17% underlying growth and underscoring the impact of the mortality-driven volume headwind.

Cemetery Revenue and Margins Lead the Upside

Cemetery operations were the clear growth engine, with comparable cemetery revenue up about $31 million, or 7%. Core recognized preneed revenue climbed roughly $28 million, and cemetery gross profit grew $15 million, lifting margins by around 120 basis points to about 33%, helped by higher-margin trust income.

Preneed Sales Momentum Remains Strong

Preneed sales stayed robust across the portfolio, with total preneed funeral sales production up about $18 million, or 6%, and cemetery preneed sales up $32 million, or 10%. Management pointed to sustained sales velocity, successful seminar programs, and the rollout of an insurance product across SCI Direct locations as key drivers of future at-need revenue.

Operating Cash Flow Proves Resilient

Adjusted operating cash flow reached $335 million, up nearly $20 million, or 6%, year over year, despite lower operating income and higher cash interest. The improvement was driven by strong preneed cash receipts and favorable working capital timing, reinforcing the company’s ability to fund growth and shareholder returns.

Capital Deployment and Shareholder Returns Stay Active

SCI continued to balance growth investments with returns to shareholders, deploying $108 million in capital expenditures, including $41 million for new cemetery development and $24 million on acquisitions. The company returned about $190 million via $143 million of share buybacks, roughly 2 million shares at about $80, and $47 million in dividends, while keeping an active acquisition pipeline targeting $75–$125 million.

Liquidity and Leverage Support Flexibility

The balance sheet remains a source of comfort, with total liquidity of roughly $1.7 billion, including about $260 million of cash and $1.45 billion of available credit. Net debt to EBITDA stands at approximately 3.68 times, placing leverage at the lower end of the long-term 3.5 to 4.0 times target and leaving room for continued capital deployment.

Trust Funds Recover After Weak Quarter

Trust fund performance was soft in the first quarter, with combined returns down 0.7%, modestly pressuring reported results. However, management reported a sharp rebound in April with estimated returns of 4% to 5% and reiterated an expectation for roughly 7% trust fund returns for the full year 2026.

Funeral Volumes Decline on Tough Mortality Comparisons

Funeral volumes were the main weak spot, as core funeral services performed dropped 6.6% in the quarter. This translated into a roughly $17 million decline in total comparable funeral revenue and about an $18 million drop in core funeral revenue, reflecting a much softer mortality and flu season compared with last year.

Funeral Margins Under Pressure

Lower volumes flowed directly into profitability, with funeral gross profit down about $23 million and gross margin compressing around 300 basis points to just above 21%. Management cautioned that, absent a volume recovery, funeral margins are likely to remain slightly down for the full year even as pricing and mix provide some offset.

Near-Term Volume Headwinds Cloud Visibility

All three months of the quarter showed declines in funeral volume, with January and February particularly soft and March only modestly better. April remained negative, though less severe, leaving management cautious on near-term seasonality and contributing to a relatively wide EPS range in its guidance framework.

Cemetery Maintenance Costs Tick Higher

Cemetery profitability gains were partially offset by higher fixed maintenance costs, which grew faster than inflation in the quarter. Management framed these expenses as a controllable cost pressure and signaled a focus on managing them more tightly to protect margins as the year progresses.

Corporate G&A and Incentive Accruals Elevated

Corporate G&A came in at $44 million, down slightly year over year but above the company’s quarterly guidance range, driven by higher accruals for long-term incentive plans tied to strong total shareholder return. SCI still expects a run-rate of about $40 million to $42 million per quarter, though timing of incentive accruals may cause some quarterly volatility.

Guidance Reaffirmed With Back-Half Recovery Hopes

Management reaffirmed normalized EPS guidance of $4.05 to $4.35 and adjusted operating cash flow of $1.00 to $1.06 billion for 2026, despite the early volume weakness. The outlook assumes comparable funeral volumes down 1% to 3%, ongoing cemetery strength with mid-single-digit growth, roughly 7% trust returns, steady corporate G&A, and solid incremental margins, pointing to confidence in a second-half recovery.

SCI’s call painted a picture of a business weathering cyclical funeral volume pressure with the support of strong cemetery operations, healthy preneed demand, and ample financial flexibility. For investors, the key watch items will be the trajectory of funeral volumes and margin recovery, but the reaffirmed guidance and active capital returns underline management’s conviction in the long-term earnings path.