SCI reports 1st Quarter. . . in-line with U.S. death totals

May 5, 2023/Finance/

When public companies report their financial numbers each quarter, it is pretty much expected that matured companies have practical and easily understood numbers in comparison to what their financial numbers were for the previous comparable quarter of operations. In that regard you would look for the results of funeral home and cemetery conglomerate Service Corporation International (SCI) to easily look to their numbers of 1Q 2022 to compare as to how their financial operations went in 1Q 2023.

However, when the company happens to be a company that fluctuates dependent on the number of deaths in their geographical locations, it is pretty obvious to understand that those numbers might be thrown off by the highs and lows of the death counts during a pandemic.

So, for this simple report I am taking a look at how the SCI numbers for 1Q 2023 compare on a percentage basis, not with last year’s numbers, but with the numbers of deaths reported by the Center for Disease Control as found in these charts for the months and years in question.

First of all, the good news for all Americans is that the numbers of deaths in the United States is in decline from the pandemic years. For the 1st Quarter of 2023, the January, February, and March time period, the United States, according to preliminary data from the CDC reported 795,500 deaths as compared to that same quarter in 2022 when the same institution reported 928,300 deaths. . . . . That is a drop of 14.4% in the number of deaths during that same period.

All things remaining the same, one would expect that the revenue for a national death care company like SCI to almost mirror those numbers when it comes to revenue. However, when it comes to the revenue generation of SCI for the 1st Quarter of 2023 the company brought in $1.028 billion as compared to $1.112 billion in 2022 — that’s a decrease of only 7.6%. One would probably conclude that SCI did a pretty good job in holding revenue at that number in an environment with over 14% less deaths.

It’s also not surprising that death care including SCI, being a highly fixed cost enterprise, would probably not reach the plateau of income necessary to generate ancillary margins in a world where the number of deaths was reduced. And, that is exactly what happened with SCI in 1Q 2023 as the company did take in Operating Income of about 26% less than 1Q 2022. For the quarter, SCI had Operating Income of $245.6 million as compared to 335.7 million in 1Q 2022.

Finally, we did notice that SCI performed 94,217 services in 1Q 2023 as compared to 105,276 in 1Q 2022. . .that’s a reduction of about 10.5%, but again better than the lower number of deaths in the quarter which was 14.4%. If you extrapolate those numbers along with the number of deaths provided by the CDC, it would also indicate that SCI raised it’s market share by about .5% year over year also.

So, today’s analytical study of SCI and its 1st Quarter did not really study the financial underpinnings as much as it did the benchmark of number of calls as compared to the number of reported deaths. On that data it appears that SCI more than held its own in retaining, and even increasing, its share of the market as the number of deaths from the pandemic starts coming back to normal numbers.

SCI does make a couple of comparisons in their report to the last pre-pandemic year of 2019. First of all, they report that “adjusted earnings” are growing at a 19% compounded annual basis where they had expected these earnings to grow at between 8-12%. They also make note of the fact that the number of funeral services performed is 4% higher than 1Q 2019 levels.

You can see the Service Corporation International 1Q 2023 report here.

Disclosure — The author of this article is a shareholder of Service Corporation International.

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