In my opinion, it wasn’t an unreasonable or surprise 3rd Quarter 2026 report by Service Corporation International (SCI).   Here’s what SCI CEO Thomas Ryan said in his opening statement from the report that you can access here:

 

“Today, we reported adjusted earnings per share of $0.97 and adjusted net cash provided by operating activities of $296.9 million, both delivering double-digit growth compared to the prior-year quarter. Our funeral segment delivered solid results, supported by continued growth in average revenue per service and stable funeral service volumes. Our cemetery segment generated 4% growth in comparable revenue, driven by higher recognized preneed property, merchandise and service revenue.

Preneed sales production remained a key contributor to our long-term growth outlook, with comparable funeral preneed sales production increasing 6% and comparable cemetery preneed sales production growing 5%. Additionally, recognized preneed cemetery property revenue grew 1%, while preneed property sales production increased 4%. 

 

However, some of the numbers and ratios in the traditional funeral home business continue on a line which makes it look like long-term unfriendly trends may continue with no end in sight.  CEO Ryan continued by saying this:

 

“Despite these positive revenue and sales trends, margins were pressured by higher healthcare costs, higher selling compensation costs and increased advertising and marketing expenditures supporting our preneed sales growth. . . . “

 

SCI stock fell 8.7% on Thursday, the first day of the stock market since Service Corporation International announced their 3rd Quarter 2026 results on Wednesday.  While some might call the 3Q26 report by SCI disappointing, I think that a downward guidance on future profits is the main  reason that the stock took this tumble on Thursday.

 

Remembering that SCI had previously stated during the year (July 2026) that their “Earnings Per Share” (EPS) would come in somewhere between $4.10 and $4.30 per share here’s what was announced in the 3Q26 report “. . . Full year adjusted earnings per share are now expected to be $3.94 to $4.04. While we expect year-over-year revenue growth, this outlook reflects lower funeral volumes than we originally anticipated, coupled with the continued impact of higher healthcare costs, as well as higher selling compensation and advertising and marketing expenditures supporting our growth in preneed sales production. . . . “

 

It’s my opinion that giving this “re-statement” of expectations with the high point of potential EPS ($4.04) being lower than what was previously the “low-point expectation” of EPS ($4.10) probably riled many in the investment community.

 

Funeral Director Daily take:  SCI has for the entirety of the 21st Century been a good company at delivering shareholder value (the stock sold for about $4.00 per share in 2000) and sells at roughly $75 per share today.  That’s over an 18x multiple (meaning $100,000 in stock in 2000 would be worth more than about $1.8 million today).

 

However, the increasing costs of delivering funerals and cremation services from traditional funeral homes seems to be a factor that is not easing up and the margins once deemed so good in the Death Care business may be harder and harder to achieve.  I think that has made some take a look at Death Care, including SCI stock, and wonder if it can provide the exceptional shareholder value from the past into the future.

 

Another thing looming on the horizon will be the restructuring of interest on the debt that SCI owes that comes due in the next 14-15 months.  Here’s a chart on what I believe that debt to be that will be coming due in 2027 and early 2028.

 

Major Upcoming Debt Maturities

Debt Instrument	Maturity Date	Outstanding Balance
7.5% Senior Notes	April 2027	$143.3 Million
4.625% Senior Notes	December 2027	$546.0 Million
Term Loan	January 2028	$628.6 Million
Bank Credit Facility	January 2028	$285.0 Million
5.125% Senior Notes	June 2029	$750.6 Million

 

Back earlier in this decade, SCI had done a really good job of restructuring their debt payments into low-interest environments.  Today, however, the interest rate situation has changed and investors will wonder what the price of re-financing these debts will be. . . . knowing that higher interest rates, if that is where the new rates land, also eat into profitability.

 

Disclaimer — The author of this article for Funeral Director Daily is a shareholder of Service Corporation International.

 

Funeral Director Daily will be back next week with more information from SCI that we hope to derive from their Earnings Call.

 

More news from the world of Death Care:

• Green funeral services offer natural alternative. LocalNewsOne (MD)
• An embalmer who helps people feel comfortable with death.  Georgetown University (DC)
• It’s your funeral:  Former academic gives Hongkongers more end-of-life choices.  South China Morning Post (China)
• Everstory Partners expands Everstory University beyond its workforce.  EIN Presswire
• “How digging graves taught me about life.”  BBC News (Great Britain)

 

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