Yesterday we gave you a recap of the death care public companies that make up the Death Care Index and their performance in 2017.  We also promised that we would bring you some ideas that we have where those companies may be headed in the year ahead.  Again, please couch your thoughts with the fact that we are experts in the funeral industry — not the stock market.

Here are some thoughts we have about the public companies and where they will head in 2018:

Service Corporation International –  There is no doubt that this company understands how to profit from the operation of to the consumer funeral and cremation services.  In 2017 their cemetery margins grew while their funeral revenues were lower year over year.  We think that trend will continue as cremation sales will outnumber funeral sales and they come at a lower price point per service.  However, we think that SCI will soon really be cashing in on their investment in the Neptune Society as that low cost provider gains market share in major markets.  In addition, we feel – that as the top dog in the business – SCI has the leverage to make the big acquisitions – much like the Allnut purchase in 2017 – that can be accretive to the bottom line in short time.  We expect another good year from SCI.

Hillenbrand Industries – Analyst Liam Burke makes a case that “despite overall trends in its end markets, Batesville remains a valuable asset providing consistent operating margins with strong free cash flow that can be allocated towards accretive acquisitions,etc.  With Batesville providing a stable base of revenue and profit, the Process Equipment Group is the driver of top-line growth.”  We certainly believe in this concept.  We will take it even one step farther. . . with 43% of the market share in the American casket business we can picture a scenario whereby Batesville may try to purchase the casket business, and its 31% share, from Matthews.  Doing so, even in a diminishing market, may allow Batesville to continue to to profit from caskets for a long time.  We even see a scenario, where in a diminishing market, the Justice Department might even allow such a turn of events.

Matthews International — Matthews had a rough 2017 but analyst Liam Burke sees some things coming together for the company in 2018 and, as recently as December 20, issued a price target of $92 for the company in 2018.  That would be a 76% increase from its year end closing price of $54.35.  Burke mentions that the company is getting close to finishing the integrations of acquisitions Schawk and Aurora Casket into the company and believes that could add $10-12 million in EBITDA to the bottom line.  Those of us at Funeral Director Daily are not quite so bullish.

Assurant —  Assurant continues to refine their execution in many of their markets, including funeral insurance.  They are also in a good spot with consumer warranty insurance and proved in 2017 that they could come thru a major insurance claim environment in good position.  If nothing else, 2017 showed that they have a real solvent structure and we expect them to grow premium revenues for the year.

StoneMor Partners — As reported yesterday, 2017 has been a difficult year for StoneMor as many executive level changes were made.  That is never easy.  The encouraging sign is that, of what has been reported to date, sales figures are up.  The flip side of that is that costs are up even more so the loss has been widened.  StoneMor has also suspended its dividend.  We expect StoneMor to continue to work to move back to more reliance on the cemetery side of the business in 2018.  That is where they “cut their teeth” and that is what they know best.

Carriage Services —  We think Carriage Services is in a good spot to begin to maximize revenues from its locations.  Most of their locations are not overly high volume and most are in locations where service matters.  They have a good chance to own this “Sweet Spot” in regional center communities that can bring higher than average price per case.  The flip side of this is that those locations, if they would start to trend towards lower revenue cremation operations,  then the downward spiral is tough because there is not a big enough volume in those communities to make up for that revenue loss.  We think that Carriage Services, itself, does not know for sure if they are a metropolitan large volume player or a regional center higher dollar per case operation.  We are not sure that they can be both as investors are looking to them for answers to that question.

Park Lawn Corporation — We believe that Park Lawn Corporation will aggressively be on the prowl for new acquisitions to help grow the top revenue line.  We don’t know anybody there but their public stance makes us think that they want to turn their 88 properties into a much bigger player in the industry in North America.  The key will be making those acquisitions bringing in the top line revenue while operating effeciently enough to keep the bottom line profitable.

Security National Life –– This company will continue to operate in an efficient and gradual manner.  Don’t look for them to do anything rash as that has not been their custom.

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