SCI 3rd Quarter shows a steady course

November 3, 2025/Finance/

I was again reminded of stock guru Peter Lynch and his affinity for “boring investments” when I looked at the 2025 3rd Quarter results for Service Corporation International that were issued last week. Lynch, who you may know, was the broker/analyst/investor who led the mutual fund Fidelity Magellan to a 29.2% annual rate of return from 1977 to 1990 and wrote a book called “One Up on Wall Street” where he told of how he made his stock selections.

I read that book a long time ago and it gave me a solid foundation for investing. According to Gemini artificial intelligence here’s what Lynch’s philosophy with a company such as Service Corporation International (SCI) was/is :

“In One Up on Wall Street, Peter Lynch uses the analogy of plastic knives and forks to illustrate his preference for boring, low-growth industries. While he doesn’t explicitly link the “plastic knives and forks” quote to Service Corporation International (SCI), he mentions the funeral business as an example of an unglamorous, no-growth industry that is often overlooked but can produce big winners.”

When one looks at SCI’s 3rd quarter return in relation to the high-flyer companies such as Nvidia, Broadcom, Apple, and the like it’s downright boring. . . . . but, as Lynch explains, provides growth over time. In the company’s 3rd Quarter 2025 Financial Report that you can access here, here is what SCI reported:

Revenue grew $44.1 million, or 4.4%, over the third quarter of 2024
Gross profit increased $12.9 million, or 5%, in the current quarter
Comparable total funeral sales average grew 3.1% over the third quarter of 2024 supported by 13.4% growth in non-funeral home sales average
Cemetery preneed sales production increased 9.6% in the current quarter

Here’s how Tom Ryan, SCI’s Chairman and CEO reacted to those numbers and anticipated the future in a prepared statement in the company’s press release, “We are proud to report adjusted earnings per share of $0.87 and net cash provided by operating activities of $252.3 million. Strong performance in our cemetery segment was led by an increase in preneed cemetery sales production of 10%, which drove growth in comparable cemetery revenue of 7% and cemetery gross profit of 12%. An increase in our comparable core funeral average was offset by the anticipated decline in comparable core funeral services performed. In addition, our non-funeral home sales average increased 13.4%, far outpacing the slight decline in non-funeral home services performed. Finally, our core funeral preneed sales production increased 9% with increases in both insurance and trust production. Based on these strong results, we are well positioned to have a strong finish to the year.”

Tom Anderson
Funeral Director Daily

Funeral Director Daily take: When you are the biggest at anything lots of people take notice of your performance. And there is no doubt that SCI is, by far, the largest player in the Death Care business. My guess is that their Revenue of over $4 billion is probably about 10 times more than there largest competitor so they are very large.

However, they continue to refine their business model so that they are churning out profits even as Death Care is changing. SCI seems to stay profitable and roll (and adjust) with the waves of changing funeral and cemetery consumer preferences. With that said, there is no guarantee that that track record can continue and that is what makes investing such an interesting proposition.

I see some “warning trends” that need watching. Like other funeral home providers who have seen clientele change their selections and methods of disposition, celebration, and memorialization, I think that is starting to happen with SCI properties as well.

If you look at their “Consolidated Funeral financials” they have a line-item named “Non-Funeral Home Revenue”. They define that line-item as such, “Non-funeral home revenue represents services sold on a preneed or atneed contract through one of our non-funeral home sales channels (e.g. SCI Direct) and performed once death has occurred”.

If you look at the 3rd Quarter Consolidated Funeral Revenue numbers you will see that “At Need” Revenue dropped by about $4.1 million and that “Non-Funeral Home Revenue” increased by about $3.0 million. That is somewhat insignificant but does also go with a trend that I noticed that shows that “Non-Funeral Home Revenue” was about 4.0% of “Total Consolidated Funeral Revenue” in last year’s report of 2024 9-month numbers and in the 9-month 2025 numbers is was 4.4% and finally in the latest 3Q25 report it was 4.6% of that total.

“Non-Funeral Home” Revenue is probably a growing aspect of SCI’s business. . . and that is great if it does not also reflect a change of choice from traditional at-need revenue which I believe it probably does.

That indicates to me that there probably is a trend moving away from “Traditional” At-Need services to a more “Low Cost” At-Need Services that will continue to happen over time. And, just like cremation in the USA started with a small percentage of users it eventually grew at a fairly rapid pace over time. . . . . . And, I think the switch to “Non-Funeral Home Providers” such as Direct Cremation outlets will follow that trend over the next decade and beyond.

The good thing for SCI if that happens is that they are positioned with low-cost cremation providers in their network of operations. However, it is something to think about for your own traditional funeral home operation.

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