Service Corporation International ((SCI)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Service Corporation International (SCI) presented a balanced mix of optimism and challenges. The company highlighted growth in earnings per share, funeral revenue, and preneed cemetery sales production, alongside robust cash flow and liquidity. However, the call also acknowledged hurdles such as decreased preneed funeral sales production, a decline in cemetery gross profit, and increased corporate expenses.
Increase in Adjusted Earnings Per Share
The company reported an adjusted earnings per share of $0.88, marking an impressive 11% increase from the prior year period. This growth reflects the company’s strong financial performance and effective cost management strategies.
Funeral Revenue Growth
SCI experienced a $15 million, or 3%, increase in total comparable funeral revenue. This growth was fueled by solid performance in both core revenue and core general agency revenue, indicating a robust demand for the company’s services.
Cemetery Sales Production Increase
The company saw a significant boost in preneed cemetery sales production, which increased by nearly $19 million, or over 5%. This was driven by healthy increases in both large and core sales, showcasing the strength of SCI’s cemetery operations.
Positive Cash Flow and Capital Distribution
SCI generated an adjusted operating cash flow of $168 million and returned $239 million to shareholders through dividends and share repurchases. This demonstrates the company’s commitment to delivering value to its shareholders while maintaining a strong financial position.
Strong Liquidity Position
Ending the quarter with $1.4 billion in liquidity, including $250 million in cash and $1.2 billion available on a credit facility, SCI is well-positioned to navigate future financial challenges and capitalize on growth opportunities.
Decrease in Preneed Funeral Sales Production
The company faced a $29 million, or 9%, decrease in preneed funeral sales production, primarily due to the transition to a new preneed insurance provider. This highlights a key area where SCI needs to focus on stabilizing its sales operations.
Decline in Cemetery Gross Profit
Cemetery gross profit decreased by $4 million, with a 110 basis point decline in gross profit percentage. This was attributed to higher selling compensation, which offset the benefits of a 1% growth in fixed costs.
Higher Corporate G&A Expenses
Corporate general and administrative expenses increased due to legal charges, higher insurance costs, and the timing of incentive compensation accruals. These factors contributed to the overall increase in corporate expenses, impacting the company’s profitability.
Lower Recognition Rate in Cemetery Revenue
Recognized preneed cemetery revenue declined due to lower recognition rates on new construction compared to the prior year. This underscores a challenge in maintaining revenue growth in the cemetery segment.
Forward-Looking Guidance
Looking ahead, SCI maintains its normalized earnings per share guidance of $3.70 to $4 for 2025. The company has raised its cash flow outlook, expecting adjusted operating cash flow between $880 million and $940 million, supported by stronger working capital trends and anticipated lower cash taxes. This optimistic guidance reflects confidence in the company’s future performance and strategic direction.
In summary, Service Corporation International’s earnings call revealed a blend of positive growth and operational challenges. While the company showcased strong earnings growth and robust cash flow, it also faces hurdles in preneed sales and corporate expenses. Moving forward, SCI’s guidance suggests a positive outlook, with expectations of continued earnings growth and improved cash flow.