Finance

Investors seem wary of death care stocks

We last brought our readers an update on the Funeral Director Daily Death Care Index (DCI) on April 6, 2020, which represented values as of the close of business on Friday, April 3.  As we tell national publications that call us about our DCI, it is not a scientific weighting of public companies in the death care business, but does give some semblance to what the investment community is thinking about the funeral, cemetery, crematory, and preneed services business community and the direction that they are heading.

The DCI consists of eight public companies in North America with at least a portion of their business in the death care space.  We last told you that the aggregate price of owning one share of stock in each of these eight companies on April 3, 2020, was $200.49. . .which was a drop of about 34% since January 1, 2020.

If you go back to April 3, 2020, you will find that the Dow Jones Industrial Average stood at 21,413 and now stands at 23,685 — an increase of 10.6% since April 3.  You will also find that the S & P 500 has increased from April 3’s standing of 2526 to a standing of Friday, May 15, of 2863 — an increase of 13.35% and, finally, the NASDAQ composite has grown from 7487 to 9014 in the same time period — an increase of a whopping 20.4%.

Since April 3, the image of the death care profession has been one of COVID-19 and how the profession is dealing with it.  We have had six more weeks to understand what it has meant to our profession and, in that time, we have had many of the public companies relate their quarterly reports to the public.

When we tallied up the DCI Index price as of Friday, May 15, it totaled $203.28, an increase of only 1.49% since April 3, and well lagging the increases mentioned in the Dow Jones, the S&P 500, and NASDAQ.  The DCI is still off of its January 1, 2020, price by almost 33%.

For comparison sake, while the DCI is still down almost 33% from its January 1 reading, the Dow Jones is down 17%, the S&P 500 is down 11%, and the NASDAQ composite is actually up to 9014 from its January 1 reading of 8973. . .that is an increase of less than 1%, but an increase nonetheless.

It certainly appears that the stock owning public has taken a “wait and see” attitude with the death care profession.  Some of the public companies, while telling of the challenges of the COVID-19 pandemic in their quarterly reports, have also reported, what we think is some pretty good news.  That’s not to say that it has all been good news as companies that operate funeral homes reported a drop in revenue per case starting towards the end of their reporting periods — particularly near the end of March when the “no large gathering” orders came into place.  And, we are aware of investors that are somewhat wary of the debt level of retail funeral operators and their future cash-flow positions should this revenue decline continue for a long period of time.

Some of the “good” news that we have seen includes a report by Hillenbrand Industries that casket sales have been up, a report by Matthews International that their Memorialization Segment sales are pretty much on par with last year’s even though some monument and marker sales are being delayed in this environment, and a recent report by StoneMor that their sales declines are leveling off and they seem to be making progress on their turnaround plan.

Another interesting aspect that we see that indicates a “wait and see” attitude among the death care stocks is that six of the eight stocks in the DCI Index have, at least from some analysts, “Buy” ratings and Service Corporation International even carries a “Strong Buy” rating from E-Trade.  There is no rating that we could locate on Security National Financial Corporation and StoneMor carried a “Sell” rating by Smart Consensus.  Having a “Buy” rating and the stock price under performing to the market averages indicates to us a “wait and see” attitude among potential investors.

We plan to bring you some information from recent quarterly reports of Hillenbrand Industries, StoneMor, and Assurant this week as well as report on Carriage Services’ latest report, which is scheduled to be released tomorrow, May 19.

The eight public companies that comprise the DCI are:  Service Corporation International (funeral homes/cemeteries), StoneMor (funeral homes/cemeteries), Carriage Services (funeral homes/cemeteries), Park Lawn Corporation (funeral home/cemeteries), Hillenbrand Industries (Batesville Casket Company among its businesses), Assurant (Assurant Preneed among its businesses), Matthews International (memorialization products for the cemetery, funeral home, and cremation industries among its businesses), and Security National Financial Corporation (preneed, financial, funeral homes and cemeteries among its businesses).

Disclaimer–The opinions expressed are those of Funeral Director Daily.  The management of Funeral Director Daily has stock positions in Service Corporation International, Park Lawn Corporation, Hillenbrand Industries, and Security National Financial Corporation.

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