Finance

Hillenbrand Reports Earnings – Casket Revenues Drop 6%

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Hillenbrand Industries reported fiscal 3rd Quarter 2018 results last week and while positive for the company as a whole, the Batesville Casket Division reported revenue decreases for the quarter of 6%.  The company, as a whole, delivered earnings of $0.57 per share as compared to analysts estimates of $0.56 per share. You can see their report here.

The company, which has really transformed itself since 2008 as an industrial processing company, reported revenue increases of 13% for both the quarter and the fiscal year to date.  Those increases have allowed them to update their guidance to Wall Street for the year to a revenue guidance of 5-7% over previous guidance of 3-5%.

For the Batesville Casket unit of Hillenbrand, the company reported revenue of $129 million on the quarter – which is a 6% decrease from the prior year.  According to the report, the decrease in revenue was driven mainly by two factors:

  1. An upfront incentive linked to a key customer multi-year contract renewal
  2. Lower volume driven by an increase in the rate that families opt for cremation

The company also stated about Batesville that the headwinds of the 3rd quarter were partially offset by productivity gains, including a manufacturing footprint reduction.

Finally, the company stated about Batesville, “Looking ahead, contract renewals like the one we completed in the third quarter are very positive for the business and provide stability to forecasted demand.  We expect Batesville to continue to consistently deliver strong, predictable free cash flow to support our overall company strategy.”

Funeral Director Daily take:  Hillenbrand is a different company from when I was younger.  They have had to make difficult decisions because as you can see, the casket business, their original mainstay, is on the downswing – our guess is that annual Batesville revenues are in the range of about $520 million as compared to $650 million 10 years ago – a reduction of 20% in that time.  In our opinion, company leadership has done a remarkable job since 2008 as they have moved from one company – Batesville – with North American operations and revenues of about $650 million to a company 10 years later that operates 6 companies with a business footprint in 40 countries around the world.  Total revenue today is approximately $1.6 billion.

As you note from reading the above, Batesville Casket continues to be a cash-flow provider for the overall Hillenbrand financials.  As the company progresses in its new industrial processing businesses we expect Batesville to get less and less attention.  I’m guessing that the comment in the report about “a manufacturing footprint reduction” is code for “closing a plant”.  A question we have is, “In a declining casket market is there the possibility that Batesville could be spun out of Hillenbrand to a company that would concentrate on the death care business?”

Market News:  I just thought I would throw this in at the bottom of the article.  Yesterday in my Seeking Alpha morning Wall Street report it was reported that for the 2nd Quarter of 2018 (Calendar reporting companies) 79% of S & P companies have beat their earnings forecast.  According to the newsletter, that is the highest percentage in a quarter since 1994.

 

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