Service Corporation International (SCI) the largest Death Care business in North America reported their results for the 2nd Quarter of 2023 earlier this week.  They reported an increase in sales revenue of about 2.2% over the same quarter of 2022 — sales in 2Q2023 totaled $1.013 billion as compared to $990.9 million for 2Q2022.

 

The company also reported an increase in preneed contacts sold and revenue.  However, the “Comparable Preneed Core Average Revenue Per Contract Sold” dropped from $6,391 in 2Q2022 to $6,289 per contract in 2023’s 2nd Quarter.  That’s a drop of only 1.6% but probably is indicative of a higher future cremation rate and/or a smaller expected disposition spend per consumer moving forward.

 

According to the press release on SCI’s 2nd Quarter which you can access here, “Average Revenue Per Service Performed” for the quarter came in at $5,597 as compared to last year’s $5,424 — an increase of 3.1%.

 

However, the downside of the revenue increase did show up in Gross Profit margins  — indicating that expenses and/or interest rates were cutting into margins.  For 2Q2023 Gross Profit margins on Funerals dropped to 20.4% from 2022’s level of 21.2% and on the Cemetery side of the business Gross Profit margins dropped to 32.6% from 33.9% for the same periods.

 

Funeral Director Daily take:  As our headline says, we think the 2nd Quarter results of SCI show a “mixed bag” of results.  The company was successful in growing revenue, but margins slightly slipped which, at least to us, shows the headwinds of the inflation and higher interest rate environment that all death care providers are running into.

 

And, moving forward, if your average sale of Preneed is trending downward that could lead to a future where those margins get even slimmer.

 

From our point of view, we feel management at SCI may see the same signs as they very slightly dropped their earnings guidance for the year.  Here’s what SCI CEO Thomas Ryan stated in the press release, “. . . . Despite a nine cent (per share) increase in interest expense, as well as a challenging inflationary environment for the consumer, we delivered strong operating results on par with last year.  Notwithstanding these strong results in the quarter, and in light of the challenging inflationary environment and its impact on consumer discretionary spending, we are narrowing full-year adjusted earnings per share guidance to $3.40 to $3.60 from $3.45 to $3.75.. . . .”

 

Related News — According to this article from Seeking Alpha, Service Corporation International also announced that they would be raising the dividend that they pay on their common stock going forward.  The dividend will be raised from $0.27 per share quarterly to $0.29 per share effective with the shareholders of record on September 14.  According to Seeking Alpha, that dividend represents a 1.82% yield on the share price at the time of the announcement.

 

Disclaimer — The author of this article holds a stock position in Service Corporation International.

 

More news from the world of Death Care:

• Takeaways from AP’s report on financial hurdles in state crime victim compensation programs.  The Trentonian (New Jersey)
• Grantham Crematorium donates over (US$) 12,750 to Samaritans by taking part in scheme in which metal is recylced after cremations.  Grantham Journal (Great Britain)
• Family of Tipperary man settle case over wrong body being sent to funeral home.  Irish Examiner (Ireland)
• The new Oaklawn Cemetery Board is asking for donations for upkeep.  West Virginian Times (WV)

 

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