CSV Q2 Deep Dive: Margin Pressure and Acquisitions Mark a Pivotal Quarter

Funeral services company Carriage Services (NYSE:CSV) reported Q2 CY2025 results exceeding the market’s revenue expectations, but sales were flat year on year at $102.1 million. The company’s full-year revenue guidance of $415 million at the midpoint came in 1.8% above analysts’ estimates. Its non-GAAP profit of $0.74 per share was 1.8% above analysts’ consensus estimates.

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StockStory’s Take

Carriage Services’ second quarter drew a positive market response, as management pointed to operational improvements and renewed M&A activity as key drivers. President Carlos Quezada credited disciplined capital deployment and process upgrades for helping offset flat year-on-year sales. The company’s funeral segment saw a modest uptick in volume, and strategic pricing reviews boosted average revenue per contract. Cemetery revenue lagged due to delayed construction projects, but management signaled confidence in a catch-up during the second half. Notably, overhead expenses fell sharply, supporting robust operating margins despite inflationary pressures and margin compression.

Looking ahead, Carriage Services’ updated guidance assumes the successful close of several acquisitions and the completion of delayed cemetery inventory projects. CEO Carlos Quezada highlighted that the company is “back to growth mode,” with a strong acquisition pipeline and integration of new locations expected to drive second-half performance. Management pointed to margin expansion opportunities from core product rollouts and operational streamlining, but acknowledged that inflationary pressures and labor costs remain a risk. CFO John Enwright noted, “We see opportunity in the back half of the year with cemetery margins as compared to last year,” and emphasized continued focus on disciplined capital management.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to a mix of operational discipline, selective divestitures, and steps to expand its premium funeral and cemetery portfolio.

• Funeral segment volume growth: The funeral business achieved organic volume gains, attributed to higher contract counts and a focus on strategic pricing reviews. Management’s approach involves tailoring pricing strategies to local market trends and cost inflation, which helped increase average revenue per contract.

• Cemetery revenue challenges: Cemetery operations experienced lower year-on-year growth due to delays in obtaining permits for high-end inventory construction. This limited the ability to sell higher-value cemetery products, but management expects these issues to resolve in the next quarter, which could restore double-digit growth rates.

• Strong preneed sales momentum: Preneed funeral commission income—revenues generated from advance funeral planning—rose sharply, highlighting the effectiveness of the insurance preneed strategy and sales team execution. This stream provides more predictable future revenue.

• Overhead cost reductions: Overhead expenses dropped significantly, owing to both the absence of prior year’s nonrecurring items and successful restructuring at the Houston Support Center. Management expects overhead to remain stable even as revenue grows, enhancing operating leverage.

• Portfolio repositioning: The company continued divesting noncore assets in slow-growth markets while preparing to close acquisitions of premium businesses. Management explained that this approach is designed to “turbocharge” portfolio contribution by recycling capital into higher-growth, higher-margin properties.

Drivers of Future Performance

Management’s outlook for the rest of the year centers on the impact of upcoming acquisitions, inventory availability, and continued operational discipline.

• Acquisition integration: The pending close of multiple premium location acquisitions is expected to drive revenue and EBITDA growth in the second half. Management stated that these businesses, serving over 2,600 families, should meaningfully expand the company’s footprint and contribute to top-line and margin improvement.

• Restored cemetery inventory: Completion of delayed cemetery construction projects is projected to unlock higher-value sales in the back half of the year. Management anticipates this shift will help the cemetery segment return to 10%+ growth, assuming permitting and build-out timelines are met.

• Margin management amid inflation: While wage and benefit cost inflation remain a headwind, the rollout of core product lines and disciplined expense control are expected to partially offset these pressures. Management emphasized that operating leverage from overhead stability should support margin expansion if revenue accelerates as planned.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will be tracking (1) the integration and performance of newly acquired funeral and cemetery locations, (2) the impact of completed cemetery inventory projects on sales mix and growth, and (3) Carriage Services’ ability to maintain overhead discipline as revenue scales. Additional attention will be paid to updates on the premium portfolio strategy and any further M&A activity.

Carriage Services currently trades at $47.49, up from $46.25 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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