SCI Q4 Deep Dive: Volume Pressures and Cautious Guidance Shape Outlook

Funeral services company Service International (NYSE:SCI) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 1.7% year on year to $1.11 billion. Its non-GAAP profit of $1.14 per share was in line with analysts’ consensus estimates.

Is now the time to buy SCI? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Service International’s fourth quarter results were met with a negative market reaction, as the company’s financials landed in line with Wall Street expectations but failed to spark investor enthusiasm. Management attributed the quarter’s performance to stable funeral and cemetery operations, with modest revenue gains offset by rising selling costs and flat funeral service volumes. CEO Thomas Ryan described the business as “navigating a normalization period” following pandemic-related fluctuations, noting, “We saw moderate increases in revenues and gross profit in both the funeral and cemetery segments driven by strength in comparable and noncomparable operations as well as slightly lower adjusted corporate, general and administrative expense.”

Looking ahead, management’s guidance for the coming year reflects a cautious approach, acknowledging ongoing uncertainty around funeral service volumes and a shift in consumer preferences. Ryan emphasized that, while the company expects average revenue per service to rise with inflation, flat to slightly lower funeral volumes could constrain profit growth. He explained, “We expect flat to slightly down funeral volume compared to 2025 with the average revenue per case growing at inflationary rates, slightly negated by the effect of a modest cremation mix increase.” The company is focusing on cost control and targeted investments in new cemetery inventory and digital initiatives to help offset these headwinds.

Key Insights from Management’s Remarks

Management identified several operational factors that influenced Q4 performance, including shifts in product mix, compensation structure, and changing customer behavior.

• Product mix impact: The transition to insurance-funded preneed contracts in SCI Direct drove immediate recognition of commissions and selling costs, reducing high-margin merchandise revenue but supporting future growth.
• Compensation structure changes: SCI shifted sales counselor compensation toward more fixed pay, aiming to improve employee retention and sales productivity, while increasing recognized selling costs in the quarter.
• Preneed sales momentum: Preneed funeral and cemetery sales production grew in the low double digits, with management crediting increased lead generation and conversion efforts, especially in the core customer segment.
• Cremation trends and outreach: Management began piloting new media and in-location initiatives to highlight cemetery options for cremation customers, aiming to capture more value from the growing cremation segment.
• Cost management discipline: The company leveraged labor efficiency tools and a cross-functional margin improvement committee to contain fixed cost growth below inflation, helping to offset soft funeral service volumes.

Drivers of Future Performance

Service International’s outlook is shaped by muted expectations for funeral volumes, continued cost control, and targeted investments to boost sales productivity and expand premium inventory.

• Funeral volume uncertainty: Management expects funeral service volumes to remain flat or slightly down, citing waning pandemic effects, lower excess deaths, and persistent shifts in customer preferences as limiting near-term growth.
• Margin management focus: The company plans to hold fixed cost growth below inflation through labor efficiency metrics and proactive staffing adjustments, while targeting modest margin expansion in both funeral and cemetery segments.
• Targeted capital deployment: Investments will center on new cemetery inventory, digital initiatives, and selective acquisitions, with management prioritizing markets where Service International already maintains local scale to maximize returns.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be monitoring (1) whether Service International can sustain preneed sales momentum and successfully expand premium cemetery offerings, (2) the pace at which cost containment efforts are maintained amid potential shifts in funeral volume, and (3) early signs that outreach initiatives to cremation customers are driving incremental revenue. Execution on digital investments and the integration of new acquisitions will also be important indicators of progress.

Service International currently trades at $78.87, down from $84.41 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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