Finance

Zacks looks at the funeral industry, an update on the DCI

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Last week Vrishali Bagree of Zacks presented an article that appeared on Nasdaq.com.  It was entitled “Rising demand keeps funeral industry going:  Four stocks to watch”.  You can read that article here.

In essence the article tells that the Zacks Funeral Services industry is housed within the broader Zacks Consumer Staples sector.  According to the article, Zacks ranks 250 different industries and the Funeral Service industry ranks quite high at #25.

Zacks also says this about the Funeral Services industry,  “The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident about this group’s earnings growth potential. Since the end of May 2020, the industry’s consensus earnings estimate for the current year has jumped almost 22%.”

Even though Zacks has a fairly high rating for this group, it does say that the stock performance of their Funeral Services industry has lagged the S & P 500 since the beginning of the year.  Here is what they say about that, “The industry (stock price) has declined 15% over this period against the S&P 500’s growth of 11%.”  It should be noted that Zacks does not give us any indication of what companies make up their Funeral Services industry.

The article also gives what it calls “4 Trends shaping the future of the Funeral Services industry”.  Here are the trends they cite:

  1. Impact of COVID-19 –  The article mentions increased deaths but online funerals causing a threat to the traditional funeral service players
  2. Steady Demand
  3. Increased cremation rates hurt revenue per client
  4. Threat from cheaper alternatives

A Comparison with the Death Care Index (DCI) – It was interesting for us at Funeral Director Daily to see this article and look at it in relation to our proprietary Death Care Index or DCI.  While we don’t know what makes up the Zacks Funeral Services industry price we can tell you that the DCI is made up of the value of one share of stock of eight separate public companies in the death care realm.  The DCI is the sum of what one share of stock in each of those eight companies would be worth on any given day and gives an indication of how death care is faring at any given time on the United States stock exchanges.

The DCI is made up of these companies:  Service Corporation International (retail funeral/cemetery), StoneMor (retail cemetery/funeral), Carriage Services (retail funeral/cemetery), Park Lawn Corporation (retail funeral/cemetery), Hillenbrand Industries (caskets/funeral solutions), Assurant (preneed), Matthews (caskets/memorialization/cremation), and Security National Financial Corporation (retail funeral/preneed/financial tools).

While the Zacks Funeral Services industry price is down 15% according to their article, the DCI has plunged from a value of $303.73 on January 1, 2020, to $264.82 as of the close of the markets on September 30, 2020.  That is a decrease of 13%.  . so it certainly is in sync with the Zacks number and also trails the broader market by quite a bit.

That lag does not surprise us as it has been well documented that the inability to have funeral and memorial services in the wake of the social distancing rules has been in the news as being a hindrance to revenue generation for funeral homes.  We now believe, however, that many funeral homes have became better equipped with offering some type of service to their family clientele and we anxiously await the 3rd Quarter reports to see if revenues per case are improving.

It is interesting to note that of the DCI’s eight stocks, all have lost value since January 1, 2020, except Security National Financial Corporation.  The stock of SNFC has risen from $5.57 per share to $6.42 per share as of September 30.  That’s an increase of 15.3%.

Disclaimer—  The editor of Funeral Director Daily has stock positions in Service Corporation International, Hillenbrand Industries, Park Lawn Corporation, and Security National Financial Corporation.



 

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