Service Corporation International (SCI) reported their 2nd Quarter of 2026 on July 29 — which happened to be a bad day on Wall Street.  On that day the Dow Jones Index dropped 2.19%, the S&P 500 dropped 1.52%, and the NASDAQ dropped 1.74%.  It was a day where the Federal Reserve held tight on interest rates even though three members voted to raise the Federal funds rate to fight sticky inflation and a day where conflict in the Middle East brought the price of West Texas Intermediate crude oil up to $84.46 a barrel.

 

In the midst of all of that SCI reported their financials for 2Q2026 on that day.  And, as of yesterday’s market close the stock was down very slightly over where it was before SCI reported their results following the market close of Wednesday, July 29.  It’s my opinion that the “flatness” of the stock movement is kind of indicative of how I assessed the company’s 2nd Quarter report —  some good elements, some not so good elements.  You can access the 2Q2026 report here.  

 

Here’s what SCI’s CEO Thomas Ryan said about the financial report in prepared statements contained within the report:

 

“Today, we reported adjusted earnings per share of $0.90 and adjusted net cash provided by operating activities of $238.8 million, both ahead of the prior year and our expectations. Our funeral segment benefited from a continued strong average revenue per service which more than offset a better-than-expected 1% decline in funeral services performed. Our cemetery segment continued to perform well, generating 5% growth in comparable cemetery revenue. The growth was primarily driven by higher recognized preneed merchandise and service revenue, as well as higher other revenue, both of which reflected impressive earnings growth from our cemetery trust funds. Additionally, recognized preneed property revenue grew 2%, while preneed property production grew 7%. This dynamic puts temporary pressure on cemetery gross margins but expands our backlog with higher-margin deferred property sales, which will benefit us in future periods. Preneed funeral sales production also remained strong, increasing 7% on a comparable basis, reinforcing the long-term strength of our preneed strategy and helping to build our backlog of future revenue.”

 

Funeral Director Daily take:  While it is true that the company’s “Consolidated” statement of operations shows a 3.5% increase in Revenue for the 2nd Quarter and a 2.8% increase in Revenue for the first 6-months of 2026, I see some challenges brewing in the “Funeral” segment of the company.

 

When you look at the Total Revenue for the “Consolidated” Funeral Segment you will see that it has increased only 0.3% for the First-half of 2026 over the same period in 2025.  And, evidently costs to get that revenue are going up as the “Gross Profit” for the Consolidated Funerals (a segment that we believe includes all funeral homes under SCI control) has dropped from $270 million in the first-half of 2025 to $244.3 million in the first-half of 2026.  That’s a drop of about 9.6% in comparison to last year.

 

And, if you look at the “Comparable Funeral Segment Results” for the 2nd Quarter of 2026 you will see that the Revenue increased 0.9% over the same period of 2025 but the Gross Profit dropped 5.8% compared to the year prior on those higher revenues.  In raw numbers the “Comparable Funeral Segment” results showed a Gross Profit of $116.6 million in 2Q2025 and only $109.8 million in 2Q2026.  (Comparable Funeral Segments includes only funeral homes that have been operating for one year under SCI control so that the numbers are comparable).

 

From my point of view there is nothing alarming about the drop in margins and gross profit for this segment.  I do believe, however, it is indicative of traditional funeral homes at large at this moment in time.  Margins are compressed because costs, in this inflationary environment, continue to rise . . . . and there is a price-point threshold that every consumer has that becomes a “tipping point” in the extent of Death Care services that they will purchase.

 

That combination of a purchasing threshold limit by each consumer and inflationary costs will compress margins.  I think that is happening all over the country.

 

As I look forward I continue to see funeral homes being challenged with these cost pressures until inflation in the United States can get back to the 2.0% area.  In the meantime funeral home owners need to continue to contain costs of business because enhancing revenues by simply raising prices may not be a tool that works anymore.

 

“Cemetery” business  doesn’t seem to have this “margin compression” issue:  When one takes a look at the “Comparable Cemetery” Revenue and Gross Profit it does not appear that there is the extent of margin compression that one sees in the Funeral side of the equation.  For the three months ended June 30, 2026, SCI’s “Comparable Cemetery” Revenue grew 4.8% from $474.1 million in 2Q25 to $496.9 million in 2Q26 and the company’s “Comparable Cemetery Gross Profit” increased $6.7 million or 4.3% from 2Q25 to 2Q26.

 

I think those numbers are indicative of what seems to be happening with cemetery properties at large.  I think cemeteries are finding ways to improve their inventories with columbariums, mausoleums, and other premium products that gives cemeteries the ability to raise margins over time.

 

It appears that this will be a strategy of SCI moving forward as while looking at the company’s “Cash-Flow” operations, for the first-half of 2026 SCI has expended $85.4 million on what they term “Development of Cemetery Property” as compared to $76.0 million for the same period of 2025.  That’s a 12.4% increase in that investment type this year.

 

I anticipate providing more coverage on SCI’s 2Q 2026 report after I read the transcript of the company’s Earning Call with stock market analysts.

 

Disclaimer:  The author of this article for Funeral Director Daily is a shareholder of Service Corporation International (SCI).

 

More news for the world of Death Care:

• New affordable Jewish Cemetery for the Southwest will stop cremations.  ColLive
• Bishops tighten funeral rules, cracking down on eulogies and cremation norms.  Angelus

 

Enter your e-mail below to join the 3,482 others who receive Funeral Director Daily articles daily

 

“A servant’s attitude guided by Christ leads to a significant life”