Finance

Bank of America on Service Corporation International

Last week a short article was written and published by the business channel CNBC on the merits of investing in death care company Service Corporation International.  You can read that article here.

The article states that in the majority of the last economic downturns that Service Corporation has fared better than most stocks due to its position in, what they call, “the recession proof” death care industry.

Funeral Director Daily take:  I own stock in Service Corporation International and have been rewarded in the last couple of years by a nice stock price rise.  I am always amazed, however, how financial writers seem to think that nothing can ever go wrong in the death care profession.

At this point in time I believe that the historical business model of the industry is being challenged and there is no guarantee that traditional funeral homes will continue to be the money makers that they have been in the past.  It is apparent to me that there is pressure from many areas that have the potential to lower both market share and earnings for traditional funeral homes.

Some of these pressure points include price pressures from low cost providers, a labor issue as to even if professional labor is available to your firm in many cases funeral home owners are being asked to pay more in salary and benefits at the same time that revenues per service are declining, and the rising cost of facilities such as capital expenses and property taxes.  Traditional funeral homes must navigate these mine fields while at the same time gathering the ability to compete with new start ups in the low-cost direct cremation market that keep chipping away at their market share.

Those can be difficult challenges.  I do believe Service Corporation International has responded by greatly enhancing its Neptune Society brand in the low cost market and continuing to monitor its traditional funeral homes consistently.  In addition, I believe that their investment in pre-need enhancements will continue to play a role in holding on to, and maybe even building more market share in its traditional markets.

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