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Growth & Income

Todd Bunton

Service Corporation International

SCI

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Estimates have been rising for Service Corporation International (SCI - Snapshot Report) after the company delivered better than expected first quarter results.

The company also recently announced a 20% increase in its quarterly dividend. It currently yields a solid 2.1%.

Nothing is Certain but Death and Taxes

Service Corporation International is the largest provider of deathcare products and services in North America. The company owned and operated 1,419 funeral homes and 373 cemeteries in 43 states, 8 Canadian provinces and the District of Columbia as of March 31, 2012.

It is headquartered in Houston, Texas and has a market cap of $2.5 billion.

First Quarter Results

Service Corporation reported better than expected first quarter results on April 25. Earnings per share came in at 20 cents, beating the Zacks Consensus Estimate by 2 cents. It was an 18% increase over the same quarter last year.

Revenues rose 4% to $602.5 million, slightly ahead of the consensus of $602.0 million. This was driven by a 7% increase in "preneed" funeral revenue as the average revenue per contract sold rose 3% to $5,565.

Meanwhile, operating income increased 4% year-over-year.

Estimates Rising

Following solid first quarter results, analysts revised their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $0.72, representing 11% growth over 2011 EPS. The 2013 consensus is now $0.78, corresponding with 8% EPS growth.

Dividend Rising

On May 9, Service Corporation announced a 20% increase in its regular quarterly dividend to 6 cents per share. It currently yields a solid 2.1%.

Valuation

Valuation looks reasonable for Service Corporation with shares trading at 15.1x 12-month forward earnings, a discount to its 10-year median of 15.7x.

And its price to cash flow ratio of 7.4 is a discount to the industry median of 9.4.

The Bottom Line

With rising estimates, solid growth projections, a 2.1% yield and reasonable valuation, Service Corporation International offers investors a lot to like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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