Death Care investors lose over $4 billion in market value Year to date

Last Friday’s calendar marked the end of the 3rd quarter of 2022 and with it the end of a quarter, and fiscal year for some, of the Funeral Director Daily Death Care Index (DCI) companies.  It won’t be long and we will be hearing the financial reports from each of these companies and how they  performed individually for the period of July, August, and September.

It’s anybody’s bet on what we will hear when the financial reports come out and the executives tell us their story of business for the quarter.  However, with an apparent good news to society of less Covid deaths, but also higher inflation on supplies, merchandise, and utilities, and a rising wage base, it is probable that many of the death care companies will be reporting less than stellar results — at least compared to the numbers that they reported during the Covid pandemic.

Death care is not the only business segment that is having these problems.  As you more than likely know, after Friday’s close of the stock markets the Dow Jones Industrial Average is down 21.1% for the year, the S&P 500 down 24.8%, and the Nasdaq composite is down 32.5%.  Those numbers put all of those indexes into what is known as a “Bear Market”.  With “Bear Market” being generally defined as a 20% reduction in value.

From my layman’s point of view on the markets, I look at the Dow Jones number as being reflective of large, historically successful companies, the S&P being reflective of the country’s small public companies, and the Nasdaq as being more technology oriented in the companies it follows.  Others might argue my definitions, but my point is that there is just no area of the economy that does not seem to have investors soured a little bit on the current state of the economy and the business realm it depicts going forward.

And, that is certainly true in death care.  The Funeral Director Daily Death Care Index consists of seven publicly traded companies that are financially involved, to some extent in death care.  It includes publicly traded consumer funeral home and cemetery companies Service Corporation International, Carriage Services, StoneMor, and Park Lawn Corporation.  It also includes industrial companies like Hillenbrand Industries, parent company of Batesville Casket, and Matthews International, parent company of Aurora Caskets and Matthews Cremation.  Finally, the DCI includes Security National Financial Corporation which is involved in retail funeral homes and cemeteries, preneed insurance, and death care insurance assignments among its portfolio of businesses.

When you look at the year-to-date performance of the Death Care Index it has dropped more than any of the three major indexes.  Using cumulative values of the DCI stocks and January 1, 2022, and comparing them to the values on September 30, 2022, you will notice a decline in value of 33.7%.  The cumulative value of owning one share of stock of each company on January 1, 2022, was $265.67 and it stands at $176.30 today — a loss that equates to that 33.7% figure.

Interestingly enough, one stock – StoneMor Inc – has increased in value from January 1.  It has increased from $2.23 per share to $3.43 per share in that time period.  There is a good explanation in that StoneMor has preliminarily accepted a buy-out offer from its largest shareholder, Axar Capital, to take the company private at $3.50 per share.  It appears that shareholders expect that deal to be consummated. Here’s where the DCI companies stand on performance year-to-date:

Company Stock Performance YTD
Service Corporation -18.70%
StoneMor Inc. 49%
Carriage Services -50.10%
Park Lawn Corp -42.40%
Hillenbrand -29.40%
Matthews Intl. -38.90%
Security National -30.50%

I did a simple calculation that shows, along with most other investments, investors have lost quite a bit of value in the death care space in 2022.  If you take the number of publicly traded shares available (as reported by E-Trade) and multiply the stock prices with the price per share for each company that gives you a “Market Value” of the company.  In doing that little exercise I have came up with a number of over $4.4 billion that the seven publicly traded death care companies are valued at (cumulatively) less than what they were valued at on January 1, 2022.

StoneMor Inc. shows a market valuation of about $136 million more than on January 1, but the other six companies have a cumulative loss of over $4.5 billion in the first nine months of 2022. . . . That’s a lot of value loss.

Funeral Director Daily take:  Of course, investors don’t really lose money until they sell out of the stock.  At present, the lower value is just that. . . a lower value of your investment.  From my point of view, death care companies, especially funeral homes, are very resilient and over the long haul almost always go up in value.

It will be interesting to see where we go from here. . . . there are some that believe that the Death Care business realm and modus operandi is completely changing.  That group believes that the growing popularity of alternate dispositions such as green funerals and natural organic reduction will continue to grow and cut into the profitability of traditional funeral homes.

Tom Anderson
Funeral Director Daily

And, of course, the secularization of America, with less and less church funerals and more and more minimalist services such as direct cremation leads many to believe that the heyday of the traditional funeral home is over.  They believe in a future where people spend less and less on funeral services. And, if that is the case, how profitable will traditional funeral service be?

I’m a realist. . . .yes, the death care market is changing. . . but it has always changed.  And, yes there are obstacles and challenges to remaining profitable.  But, the greatest thing that funeral service has going for it is the high number of entrepreneurial and successful people in it.  They will figure out the business system that keeps it profitable for them. . . The key is you have to be ready to adopt new ideas and not get so stuck in the old that you turn away clients who want the new.

Yes. . the markets are down. . .and so are some funeral home stocks.  However, as the 3rd Quarter reports roll out we will be able to see how the big public companies plan to weather the storm that is this inflationary economy.  Their answers will tell a lot of where they death care industry in America is headed.

Disclaimer — The author of this article holds stock positions in Service Corporation International, Park Lawn Corporation, and Security National Financial Corporation.

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1 Comment

  1. Benjie Hughes on October 3, 2022 at 3:36 pm

    Sounds like time to follow the old adage…buy low and sell high!!

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