Funeral Services and Public Companies – Part 1 – SCI

Every so often someone asks me what I think of the funeral/cremation/cemetery companies that are in the public ownership realm.  So, today I will start giving you my opinions of what I think each is trying to, or should try to accomplish.  Each in this series of write ups will be my day to be the CEO of that company and give my direction.

Please understand that I am not a stock broker or stock picker.  I am a funeral director and the opinions that I give here come under that vein.  . i.e. what the perception of the company is to me, what I think they are doing, and maybe,  if I was the CEO, where I would head the company’s strategy.

I have followed death care industry public companies for a long time and the five that I know of that deal with the service of funerals and cremations that I will mention beginning today, I either own the stock or have owned it in the past.  The five that I will visit about in the days to come are Service Corporation International, Security National Financial Corporation, Carriage Services, Park Lawn Corporation, and StoneMor Partners.

Service Corporation International – They have been the name ever since before I had my funeral directors’ license.  Houston’s Robert Waltrip aquired the funeral home down the street, everything went well, and SCI just kept acquiring.  Along the way, they have dabbled in the death care supply business, the insurance business, the financing business, and even the overseas funeral and cremation market.  Today they own about 1500 locations in both the funeral and cemetery sides of death care across North America.

Over the years SCI has purchased other large consolidators and been required to shed some funeral and cemetery facilities as required by the Federal Trade Commission.  Each time they do so they open up the door for new consolidator companies which opens up lots of opportunities in the industry.  From my point of view, FTC forced sales have been good for the industry and for the consumer.

I’ve learned over time to never bet against SCI.  They have scale, and in my opinion, for the last several years and going into the future that is going to matter more and more.  We’ve just learned of Beacon, the company’s new preneed sales tool, which we believe will give SCI a step up in that side of the business.  It is my opinion that the cost of the technology for Beacon is beyond what smaller consolidation companies can afford in their capital budgets which somewhat proves my point about scale.

I think in the future SCI has to decide if it is going to “brand” their businesses to a national brand or continue to lead with something like “Smith Funeral Home – Dignity Memorial”.  In my opinion, dual branding like that does not work as the local consumer continues to use “Smith Funeral Home” so when that consumer moves to another locale there is no brand loyalty to the Dignity brand.  It is a difficult dance, however, because going to Dignity nationally without the traditional name may cost heavily in the local markets.  SCI does much better with branding of the Neptune Society. . . .however, they had the history of a one name company going into that brand.

Finally, there is no doubt that Service Corporation International is a mature going-concern company.  From a stockholders point of view I think they are at a precipice as to whether they are still a growth company or are they a dividend company where they will satisfy their stockholders more by throwing off excess cash in dividends, such as public utilities,  rather than continuing to put that cash into new acquisitions.  I also think that is a delicate dance and a place where the board will be looking for balance.

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