Earlier this week Service Corporation International posted their 2nd Quarter results, which you can see in a company press release here, and we told you that we would analyze them and report our impressions.  There is nothing that surprises us with the SCI results, more so, they reinforce what we believe is the direction of the consumer movement in death care moving forward.

Here is some of what we found and why we believe it shows a consumer reinforcement of the death care direction in our society.

• Comparable Same facility At-Need revenue was down for the quarter about 3.0% from last year’s 2nd Quarter
• Comparable Same facility funeral services were down negligibly from last year
• Comparable Same facility At-Need average funeral revenue per service was down negligibly from last year
• Comparable Same facility funeral operating profit was down over 3.0%
• Comparable Cemetery Revenue was up about 11%
• By the end of the year, investments in acquisitions may be double what was expected by the company in their earlier projections

From those observations, Funeral Director Daily reinforces our belief that the movement from traditional burial to cremation with services and direct cremations is moving rapidly in our society.  We believe it accounts for revenues being down and average revenue per service being down in the SCI funeral numbers.  We also believe, although SCI will be buoyed by their ownership of Neptune Society, it will cause raw numbers of services conducted to be down as more client families look for low-cost alternatives to traditional funeral homes for direct cremations without services.

We do believe, however, that cemeteries can be a bright spot in the death care industry by working with client families of direct cremation services to memorialize their loved ones in cemeteries rather than opting for scattering or bringing the remains home in an urn.  Our thought is that SCI is working on this initiative which may be one reason cemetery revenue is up even though funeral services same store revenue is down slightly.

Finally, we believe that there is a large pipeline of current acquisitions available and SCI is moving to secure the best “fits’ for their operations.  We believe that these properties are available, not only because of the age of operators who may want to retire, but because many family firms understand the future holds challenging environments for traditional funeral homes and may want to liquidate before their numbers change too drastically.  The key in this realm moving forward, for SCI and their competitors, is to be able to choose which properties can grow numbers and market share which provide good opportunities even though their revenue per case may drop.  We believe that moving forward, acquisitions will be much more strategically driven than in the past.

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