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Some may believe that once you identify a problem that it will be fixed in a short period of time, but that is not always the case. Our Zacks Bear of the Day, StoneMor Partners has been struggling with the same persistent problem for almost two years, its sales force. In Q4 15, management began to restructure their sales force, but the issue still has not been resolved a year later.
This Zacks Rank #5 (Strong Sell) company is an owner and operator of cemeteries and funeral homes in the United States, with 224 cemeteries and 57 funeral homes in 27 states and Puerto Rico. StoneMor is the only publicly traded deathcare company structured as a partnership. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise.
Recent Earnings Announcement Data
In November STON announced Q3 16 results where they missed the Zacks consensus earnings estimate for the fourth consecutive quarter, and missed the Zacks consensus revenue estimate for the third consecutive quarter. The sales force issue remains the heavy drag on financial results as the pre-need side is not growing as much as desired. Specifically, the company saw year over year declines in revenues -4.0%, distributable cash flow -41.1%, distributable available cash -36.3%, and cash distributions -46.7%.
Management’s Take
According to Larry Miller, President and CEO, “As we indicated in our previous announcement, third quarter financial results were disappointing. We continue to work on upgrading the quality of our sales force through increased recruiting efforts and other initiatives. The pace of progress has been below our expectations, but we believe our recent results are the result of a lack of execution and not due to any broad changes in the industry. The fundamentals of our industry continue to be predictable death rates, favorable demographics and large barriers to entry in the cemetery space, of which StoneMor is one of only a few scale players. As we work on enhancing the quality and size of our sales force, we intend to provide updates on its expansion in an effort to provide visibility on our efforts and data points by which investors may monitor our progress.”
Price and Earnings Consensus Chart
As you can see in the earnings and consensus chart below, the stock price plummeted after their last earnings report, and future expectations have also declined.
Over the past 7 days, earnings estimates for FY 16 and FY 17 have all seen declines; FY 16 fell from -$0.96 to -$1.04, and FY 17 dropped from -$0.45 to -$0.59.
Bottom Line
Management recently announced a $20 million private placement of common equity with its general partner which is expected to be used for accretive acquisitions. This infusion of cash will also help the company along while they fix their staffing issues. Further, this infusion will help with their +11.53% dividend yield.
When the staffing issues are corrected, the company will have far fewer and much small issues facing them. But this staffing issue is not expected to be fixed in the near term, rather it may take until the end of Q3 17 before the issue is resolved. Therefore, it would be wise to wait on the sidelines till the workforce issue is completely fixed.
If you are inclined to invest in the Funeral Services sector, you would be best served by looking into Matthews Intl Corp (MATW - Free Report) who currently holds a Zacks Rank #3 (Hold). All other companies within the sector currently hold ranks 4 or 5 (Sell, or Strong Sell).
More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.
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Bear of the Day: StoneMor Partners (STON)
Some may believe that once you identify a problem that it will be fixed in a short period of time, but that is not always the case. Our Zacks Bear of the Day, StoneMor Partners has been struggling with the same persistent problem for almost two years, its sales force. In Q4 15, management began to restructure their sales force, but the issue still has not been resolved a year later.
This Zacks Rank #5 (Strong Sell) company is an owner and operator of cemeteries and funeral homes in the United States, with 224 cemeteries and 57 funeral homes in 27 states and Puerto Rico. StoneMor is the only publicly traded deathcare company structured as a partnership. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise.
Recent Earnings Announcement Data
In November STON announced Q3 16 results where they missed the Zacks consensus earnings estimate for the fourth consecutive quarter, and missed the Zacks consensus revenue estimate for the third consecutive quarter. The sales force issue remains the heavy drag on financial results as the pre-need side is not growing as much as desired. Specifically, the company saw year over year declines in revenues -4.0%, distributable cash flow -41.1%, distributable available cash -36.3%, and cash distributions -46.7%.
Management’s Take
According to Larry Miller, President and CEO, “As we indicated in our previous announcement, third quarter financial results were disappointing. We continue to work on upgrading the quality of our sales force through increased recruiting efforts and other initiatives. The pace of progress has been below our expectations, but we believe our recent results are the result of a lack of execution and not due to any broad changes in the industry. The fundamentals of our industry continue to be predictable death rates, favorable demographics and large barriers to entry in the cemetery space, of which StoneMor is one of only a few scale players. As we work on enhancing the quality and size of our sales force, we intend to provide updates on its expansion in an effort to provide visibility on our efforts and data points by which investors may monitor our progress.”
Price and Earnings Consensus Chart
As you can see in the earnings and consensus chart below, the stock price plummeted after their last earnings report, and future expectations have also declined.
StoneMor Partners L.P. Price and Consensus
StoneMor Partners L.P. Price and Consensus | StoneMor Partners L.P. Quote
Declining Earnings Estimates
Over the past 7 days, earnings estimates for FY 16 and FY 17 have all seen declines; FY 16 fell from -$0.96 to -$1.04, and FY 17 dropped from -$0.45 to -$0.59.
Bottom Line
Management recently announced a $20 million private placement of common equity with its general partner which is expected to be used for accretive acquisitions. This infusion of cash will also help the company along while they fix their staffing issues. Further, this infusion will help with their +11.53% dividend yield.
When the staffing issues are corrected, the company will have far fewer and much small issues facing them. But this staffing issue is not expected to be fixed in the near term, rather it may take until the end of Q3 17 before the issue is resolved. Therefore, it would be wise to wait on the sidelines till the workforce issue is completely fixed.
If you are inclined to invest in the Funeral Services sector, you would be best served by looking into Matthews Intl Corp (MATW - Free Report) who currently holds a Zacks Rank #3 (Hold). All other companies within the sector currently hold ranks 4 or 5 (Sell, or Strong Sell).
More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.
See today's Zacks ""Strong Sells"" absolutely free >>.