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Bear of the Day: Carriage Services Inc. (CSV)

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Carriage Services Inc. (CSV - Free Report) , a Zacks Rank #5 (Strong Sell) is a leading provider of death care services and products in the United States. Carriage provides a complete range of services relating to funerals, burials and cremations, including the use of funeral homes and motor vehicles, the performance of cemetery interment services and the management and maintenance of cemetery grounds. They also sell related products and merchandise including caskets, burial vaults, garments, cemetery interment rights, stone and bronze memorials, as well as other items.

Recent Earnings Data

In the company’s most recent earnings report it missed both the Zacks consensus earnings and revenue estimates.  On the positive earnings grew by +31.1%, and revenues improved by +7.4% when compared to the year ago quarter. 

Management’s Take

According to Mel Payne, CEO, “We got off to a good start in 2018 by setting numerous historical first quarter performance records including Total Revenue of $73.4 million (up 7.7%), Total Field EBITDA of $31.2 million (up 5.8%), Consolidated EBITDA of $22.4 million (up 9.2%), GAAP and Adjusted Net Income of $9.4 million and $10.5 million, respectively (up 32.1% and 29.5%), GAAP and Adjusted Diluted EPS of $0.52 and $0.59, respectively (up 33.3% and 31.1%), and Free Cash Flow of $13.4 million (up 110.4%).”

But later in the press release, Mr. Payne stated, “We are lowering the midpoint of our Rolling Four Quarter Outlook Ranges on revenues by 2.5%, Consolidated EBITDA by 4.2% and Adjusted Diluted EPS by 9.9% due to three specific issues, i.e. an acquisition under LOI (has since lapsed) that didn’t close in the fourth quarter as expected, rising interest costs on our floating rate debt, and a higher diluted share count related to our convertible debt and recent increase in our share price.”

Price and Earnings Consensus Data

As you can see in the table below, the decrease in future guidance caused the stock price and future earnings estimates to fall.

Carriage Services, Inc. Price and Consensus

Carriage Services, Inc. Price and Consensus | Carriage Services, Inc. Quote

Declining Earnings Estimates

After the decrease in expectations, earnings estimates for Q2 18, Q3 18, FY 18, and FY 19 were all negatively revised over the past 30 days; Q2 18 fell from $0.44 to $0.34, Q3 18 dropped from $0.38 to $0.24, FY 18 was cut from $1.84 to $1.43, and FY 19 declined from $2.12 to $1.50.

Bottom Line

While the most recent quarter saw impressive growth in several key areas, management’s downside guidance really impacted the near and mid-term prospects for the company.  Once this issues are settled, the company should be back on track.

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