Service Corporation International (SCI) Q3 Earnings call transcript Oct 31, 2024

SCI's third quarter earnings call showcased a resilient company navigating through both challenges and opportunities. Here are the key takeaways from the call.

Financial Performance: SCI reported adjusted earnings per share of $0.79, a slight increase from the prior year. Gross profit from both funeral and cemetery segments remained stable, with a slight increase in gross profit percentage. The company also made significant investments in acquisitions, adding 10 funeral homes and 2 cemeteries, and investing in real estate for future expansion.

Functional Performance: The funeral segment saw a decline in core preneed sales production due to a transition to a new preneed insurance provider. However, the cemetery segment showed stability, with flat comparable revenue offset by a decline in core revenue. The company anticipates a return to growth in 2025, with a focus on expanding its preneed backlog and capitalizing on demographic trends.

Future Outlook: SCI is optimistic about its future, with a focus on earnings growth towards the higher end of its historical annual guidance of 8-12%. The company expects funeral volumes to stabilize and preneed cemetery sales production to return to low to mid-single-digit percentage growth. SCI's acquisitions and expansion plans, coupled with its vast North American network, position the company for future success.

Investor Engagement: During the call, investors expressed concerns about funeral volume trends and the impact of COVID-19. SCI's management team provided insight into their strategies for navigating these challenges, including a focus on expanding their preneed backlog and leveraging demographic trends. Investors also inquired about the company's acquisitions and the impact of these deals on future growth prospects.

Innovation and Adaptation: SCI is actively adapting to changes in the market, particularly in the funeral segment, where it is transitioning from trust to insurance-funded contracts. This shift, along with operational changes in certain markets, has resulted in a temporary slowdown in sales. However, the company is confident that it will stabilize and grow again in the coming quarters.

Conclusion: SCI's third quarter earnings call painted a picture of a company navigating through both challenges and opportunities. Despite facing headwinds in certain areas, SCI remains optimistic about its future, with a focus on growth through acquisitions, expansion, and innovation. The company's confidence in its strategies, coupled with its strong financial position, bodes well for its future prospects.