Service Corp Q1 Earnings Beat Estimates, Funeral Revenues Rise

Service Corporation International SCI posted first-quarter 2025 results, with the top line increasing year over year and beating the Zacks Consensus Estimate. Also, the bottom line increased year over year and surpassed the consensus mark. In the funeral segment, Service Corp reported strong performance, with growth in the number of services conducted and the average revenues per service from the prior year.

Closer Look at SCI’s Q1 Results

SCI posted adjusted earnings of 96 cents per share, which surpassed the Zacks Consensus Estimate of 90 cents. The metric increased from the year-ago quarter’s adjusted earnings of 89 cents. An increase in gross profit, reduced interest expenses and a lower share count more than compensated for a higher tax rate, leading to 7.9% year-over-year growth for the quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Total revenues of $1,074.2 million increased 2.8% from $1,045.4 million in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $1,054 million.

Gross profit increased 6.3% to $291.4 million from $274.2 million last year. We note that the gross margin expanded by 90 basis points (bps) year over year to 27.1%.

Corporate general and administrative expenses increased 8.2% year over year to $44.7 million. As a percentage of revenues, this metric grew 20 bps year over year to 4.2%.

Operating income rose 8.4% to $251.7 million from $232.2 million in the year-ago period. The operating margin increased 120 bps year over year to 23.4% in the quarter under review.

SCI Provides Insights by Segments

Funeral Operations: Total funeral revenues reached $639.5 million, faring better than the Zacks Consensus Estimate of $607.3 million. This compared with $604.7 million in the first quarter of 2024. Gross profit increased 16.8% to $154 million from $131.9 million. The gross margin improved 230 bps year over year to 24.1%. The segment performed 97,854 funeral services compared with 94,366 in the prior-year quarter, with average revenues per service of $5,748 versus $5,608.

Comparable funeral results showed that core revenues increased 3.6% to $521.7 million, driven by atneed revenue growth of 1.6% to $319.1 million and matured pre-need revenue growth of 6.9% to $202.6 million. Non-funeral home revenues increased 16.5% to $27.5 million, whereas core general agency and other revenues grew 18% to $54.5 million. Non-funeral home pre-need sales revenues decreased 23.4% to $22.2 million.

Total comparable funeral services performed grew 1.8% to 95,624, with atneed services edging down 0.3% to 50,388 and matured pre-need services rising 3.3% to 29,273. Non-funeral home services increased 5.7% to 15,963. The comparable core cremation rate increased to 57% from 56.6%, while the total comparable cremation rate rose to 64.1% from 63.4%.

Comparable funeral pre-need sales production decreased 10.2% to $284.1 million, with core contracts sold declining 6.2% to 34,561 and non-funeral home contracts sold decreasing 24.9% to 19,355. Core average revenue per contract sold increased 1.1% to $6,533.

SCI Stock Past Three-Month Performance

Cemetery Operations: Total cemetery revenues were $434.7 million, lagging the consensus estimate of $446.4 million. This compares with $440.6 million in the first quarter of 2024. Gross profit was $137.4 million, down 3.4% year over year. The gross margin declined 70 bps year over year to 31.6%.

Comparable cemetery results showed core revenues decreasing 2.5% to $397.7 million, with atneed revenues increasing 1.8% to $111.7 million, but recognized pre-need revenues declining 4% to $286 million. Other cemetery revenues increased 6.7% to $35.2 million. The recognition rate was 91.5% compared with 92.9% in the prior year.

Comparable cemetery pre-need and atneed sales production decreased 0.9% to $434.8 million, with property sales moving down 4.2% to $233.4 million but merchandise and services sales rising 2.6% to $204.4 million. Pre-need sales production decreased 2.5% to $322.5 million.

Service Corp’s Financial Health Snapshot

The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $227.2 million, long-term debt of $4.74 billion, and total equity of $1.65 billion.

Net cash provided by operating activities was $311.1 million during the three months ended March 31, 2025. Total capital expenditure was $78.2 million, including capital improvements at existing locations of $20.7 million, cemetery property development of $41.4 million, digital investments and corporate of $4.8 million, and growth capital expenditure of $11.3 million.

SCI’s 2025 Guidance

The company’s guidance for 2025 has been unchanged from previous projections and aligns with its long-term strategic and financial goals. Adjusted earnings per share are expected to be $3.70-$4.00. At the mid-point, this range is consistent with the company’s expected long-term growth framework of 8% to 12%.

Net cash provided by operating activities, excluding special items and cash taxes, is projected between $1,005 million and $1,065 million. Based on the mid-point of the EPS guidance, cash taxes are anticipated to be $175 million. After accounting for these taxes, net cash provided by operating activities, excluding special items, is expected to be $830-$890 million.

The total capital expenditure for 2025 is forecast at $315 million. This includes $130 million allocated to capital improvements at existing field locations, $160 million for the development of cemetery property, and $25 million for digital investments and corporate initiatives.

The stock has gained 3.1% in the past three months compared with the industry’s rise of 1.2%.

Some Solid Staple Bets

We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Nomad Foods Ltd.  NOMD, United Natural Foods, Inc. UNFI and BRF Brasil Foods SA BRFS.

Nomad Foods manufactures and distributes frozen foods. NOMD presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings indicates growth of 3.3% and 7.3%, respectively. NOMD delivered a trailing four-quarter earnings surprise of 5%, on average.

United Natural is the leading distributor of natural, organic and specialty food and non-food products. It currently carries a Zacks Rank of 2 (Buy).

UNFI delivered a trailing four-quarter earnings surprise of 408.7%, on average. The consensus estimate for United Natural’s current financial-year sales and earnings indicates growth of 1.9% and 485.7%, respectively, from the year-ago period’s reported figure.

BRF, formerly Perdigao S.A., is a Brazil-based food company. It carries a Zacks Rank #2 at present. BRFS delivered a trailing four-quarter average earnings surprise of 9.6%.

The consensus estimate for BRF’s current financial-year sales and earnings indicates growth of 0.3% and a decline of 2.8%, respectively, from the prior-year reported levels.

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This article originally published on Zacks Investment Research (zacks.com).

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