Carriage Services Announces 3rd Quarter Results

Following the close of business yesterday Carriage Services announced their 3rd quarter results.  After a short note that two of their large market areas, Florida and Texas, were affected greatly by Hurricanes Irma and Harvey – which they contend more than likely affected results.

Here are some of the notes from the report, which can be found here, from CEO Mel Payne:

  • Record quarterly revenue of $61.1 million a 1.5% increase over 2016.  This is, however, less than analysts consensus estimates of $62.86 million expected revenue.
  • Net Income of $3.0 million for the quarter – which is down over 46% from last year.
  • Total EBITDA of $23.0 million – which is down 5.9% from last year.
  • Record revenue for the last nine months of $193.1 million — an increase of 4.2% over 2016
  • Year to date earnings/share of $1.00 which is a 21.9% decline and YTD EBITDA of $51.2 million which is a 6.5% decline over the past year.
  • Year to Date Same Store Funeral Contract volume and revenue have both increased 3.1% over 2016.
  • Letters of Intent signed to acquire four businesses in the next 90 days that will collectively add over 3000 funerals to the portfolio.
  • Three of the Letters of Intent will be in “Large new strategic markets” for Carriage, which includes a new state.
  • The Board will raise the dividend to $0.30 per share annually which represents, at today’s share price, a dividend yield of 1.2%
  • The Board also authorized an additional $15 million share repurchase program in addition to the $11 million still available under a previous authorization.

An interesting comment also found its way into the report, “We have learned from mistakes and material market share losses within our funeral home portfolio in the past that focusing too heavily on maximizing short term profitability more often than not leads inevitably to losses in market share that are extremely difficult to reverse.”

Funeral Director Daily take:  Carriage Services is always a tough company for us to read.  While they have plodded away and grown slowly, they always seem to leave us lacking for more.  For instance, they did have record revenues this quarter, but those revenues did fall below what analysts’ estimated.  Furthermore, those record revenues only increased 1.5% in total over last year — even when we believe that as an acquisition company — they should have more sources (funeral homes) of revenues so that 1.5% doesn’t seem like much.

I think part of the answer in that question is that while they are adding acquisition revenue and, according to their statement, funeral contract revenue is increasing, then the answer is, as they say in their report, that they are losing cemetery revenue.  This is a trend that will have to improve going forward. The good part of this equation is that funeral revenues are increasing as in many areas of the country they are decreasing due to the price pressures of direct cremation services.

In general, I would say that slow, plodding growth pays off in the long run.  It’s my opinion that Carriage Services just has to understand what it does good – and where – and concentrate on that type of acquisition target.  They should also figure out what they don’t do good, divest of those types of businesses, and fine tune their operations for greater efficiencies.

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