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Service Corporation (SCI) Q4 Earnings Top Estimates, Revenues Up
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Service Corporation International (SCI - Free Report) posted solid fourth-quarter 2020 results, wherein both top and bottom lines increased year over year and the latter beat the Zacks Consensus Estimate. The upside can be attributed to increased mortality due to coronavirus, which led to higher funeral services performed as well as increased burials in the company’s cemeteries. Apart from these, the Zacks Rank #2 (Buy) company gained on a solid cost structure continued, which helped drive considerable margin enhancements in the funeral and cemetery segments.
Q4 in Detail
Service Corporation posted adjusted earnings of $1.13 per share, which came way ahead of the Zacks Consensus Estimate of 91 cents. Further, the bottom line more than doubled from the year-ago quarter’s reported figure of 53 cents. The year-over-year growth was attributed to elevated gross profit resulting from increased funeral services and burials performed, together with a robust increase in cemetery recognized preneed revenues. Further, the bottom line gained on reduced shares outstanding, a decline in interest expenses and a lower tax rate compared with the year-ago quarter.
Service Corporation International Price, Consensus and EPS Surprise
Total revenues of $970.3 million advanced nearly 14% year over year, backed by increased funeral and cemetery revenues. However, the figure came below the consensus mark of $974 million.
Corporate general and administrative costs escalated $6.1 million (or 24.3%) to $31.1 million, mainly owing to greater legal expenses. The company’s interest costs fell $8.2 million to $36.2 million in the quarter. Operating income of $285.4 million increased 18.5% year over year.
Segment Discussion
Consolidated Funeral revenues grew 11.3% to $547.8 million on higher core revenues. Core revenues gained from a rise in atneed and matured preneed revenues. Further, non-funeral home revenues improved year over year, while recognized preneed revenues saw a decline of 10% to $31.4 million.
Comparable funeral revenues advanced 10% year over year, mainly due to major growth in core funeral revenues, which in turn were backed by higher core funeral services performed. However, core funeral services performed were somewhat negated by a fall in core average revenue per service, stemming from social-distancing measures that led to smaller and lesser funeral memorial services. Moreover, the core cremation rate rose 120 basis points.
Comparable preneed funeral sales production dropped 1.6% due to declines at core funeral locations, somewhat made up by increases in the non-funeral home locations. This was accountable to the continued effects of social distancing on two of the company’s key lead sources — at-home follow-up visits and in-person seminars.
Comparable funeral gross profit jumped 43.6% to $147.3 million. Also, the gross profit margin expanded 640 basis points to 27.5%, courtesy of increased higher-margin core business activities and a better cost structure somewhat due to the smaller and lesser memorial services performed.
Consolidated Cemetery revenues rose 17.7% to $422.4 million, thanks to increased core revenues. Core revenues gained from an increase in both atneed and total recognized preneed revenues.
Comparable Cemetery revenues improved 17.8% year over year on the back of higher core revenues. This, in turn, was fueled by elevated atneed revenues, which stemmed from a rise in burials performed. Moreover, recognized preneed revenues grew, courtesy of solid comparable preneed cemetery property sales production.
Comparable preneed cemetery sales production rose 16% owing to growth in large sales activity as well as greater contracts sold. Sales velocity continued to be driven by the expansion of virtual tools, increased customer sales incentives, and greater leads from atneed services and company-generated leads. Further, the company continued to witness elevated conversion and close rates, thanks to customers’ greater awareness of the possible effects of coronavirus, along with a rise in location traffic as a result of greater funeral services and burials performed.
Comparable cemetery gross profit soared 42.4% to $164.5 million and the respective margin expanded 680 bps to 39%. The upside can be attributable to higher cemetery revenues together with an improved cost structure.
Other Financial Details
The company, which shares space with Carriage Services (CSV - Free Report) , ended the quarter with cash and cash equivalents of $230.9 million, long-term debt of $3,514.1 million and total equity of $1,752.6 million.
Net cash provided by operating activities amounted to $804.4 million in 2020. During the same timeframe, the company incurred capital expenditures of $222.2 million. The company undertook several cemetery development and construction projects throughout the year. It expects adjusted net cash from operating activities to be $600-$700 million for 2021. Expenditures associated with capital enhancements at current locations and cemetery development are anticipated in a band of $235-$255 million.
Outlook
Management anticipates witnessing continued pandemic-led impacts in the first half of 2021. The company’s guidance range for the year is also wider than usual owing to the uncertainty surrounding the COVID-19 impact. For 2021, Service Corporation envisions adjusted earnings per share of $2.50-$2.90. The company’s earnings came in at $2.91 per share in 2020.
Shares of this renowned deathcare services company have gained 14.7% in the past six months compared with the industry’s growth of 22.7%.
Looking for More Funeral Services Stocks? Check These
Matthews International (MATW - Free Report) has a Zacks Rank #2 and a trailing four-quarter earnings surprise of 43.6%, on average.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Service Corporation (SCI) Q4 Earnings Top Estimates, Revenues Up
Service Corporation International (SCI - Free Report) posted solid fourth-quarter 2020 results, wherein both top and bottom lines increased year over year and the latter beat the Zacks Consensus Estimate. The upside can be attributed to increased mortality due to coronavirus, which led to higher funeral services performed as well as increased burials in the company’s cemeteries. Apart from these, the Zacks Rank #2 (Buy) company gained on a solid cost structure continued, which helped drive considerable margin enhancements in the funeral and cemetery segments.
Q4 in Detail
Service Corporation posted adjusted earnings of $1.13 per share, which came way ahead of the Zacks Consensus Estimate of 91 cents. Further, the bottom line more than doubled from the year-ago quarter’s reported figure of 53 cents. The year-over-year growth was attributed to elevated gross profit resulting from increased funeral services and burials performed, together with a robust increase in cemetery recognized preneed revenues. Further, the bottom line gained on reduced shares outstanding, a decline in interest expenses and a lower tax rate compared with the year-ago quarter.
Service Corporation International Price, Consensus and EPS Surprise
Service Corporation International price-consensus-eps-surprise-chart | Service Corporation International Quote
Total revenues of $970.3 million advanced nearly 14% year over year, backed by increased funeral and cemetery revenues. However, the figure came below the consensus mark of $974 million.
Corporate general and administrative costs escalated $6.1 million (or 24.3%) to $31.1 million, mainly owing to greater legal expenses. The company’s interest costs fell $8.2 million to $36.2 million in the quarter. Operating income of $285.4 million increased 18.5% year over year.
Segment Discussion
Consolidated Funeral revenues grew 11.3% to $547.8 million on higher core revenues. Core revenues gained from a rise in atneed and matured preneed revenues. Further, non-funeral home revenues improved year over year, while recognized preneed revenues saw a decline of 10% to $31.4 million.
Comparable funeral revenues advanced 10% year over year, mainly due to major growth in core funeral revenues, which in turn were backed by higher core funeral services performed. However, core funeral services performed were somewhat negated by a fall in core average revenue per service, stemming from social-distancing measures that led to smaller and lesser funeral memorial services. Moreover, the core cremation rate rose 120 basis points.
Comparable preneed funeral sales production dropped 1.6% due to declines at core funeral locations, somewhat made up by increases in the non-funeral home locations. This was accountable to the continued effects of social distancing on two of the company’s key lead sources — at-home follow-up visits and in-person seminars.
Comparable funeral gross profit jumped 43.6% to $147.3 million. Also, the gross profit margin expanded 640 basis points to 27.5%, courtesy of increased higher-margin core business activities and a better cost structure somewhat due to the smaller and lesser memorial services performed.
Consolidated Cemetery revenues rose 17.7% to $422.4 million, thanks to increased core revenues. Core revenues gained from an increase in both atneed and total recognized preneed revenues.
Comparable Cemetery revenues improved 17.8% year over year on the back of higher core revenues. This, in turn, was fueled by elevated atneed revenues, which stemmed from a rise in burials performed. Moreover, recognized preneed revenues grew, courtesy of solid comparable preneed cemetery property sales production.
Comparable preneed cemetery sales production rose 16% owing to growth in large sales activity as well as greater contracts sold. Sales velocity continued to be driven by the expansion of virtual tools, increased customer sales incentives, and greater leads from atneed services and company-generated leads. Further, the company continued to witness elevated conversion and close rates, thanks to customers’ greater awareness of the possible effects of coronavirus, along with a rise in location traffic as a result of greater funeral services and burials performed.
Comparable cemetery gross profit soared 42.4% to $164.5 million and the respective margin expanded 680 bps to 39%. The upside can be attributable to higher cemetery revenues together with an improved cost structure.
Other Financial Details
The company, which shares space with Carriage Services (CSV - Free Report) , ended the quarter with cash and cash equivalents of $230.9 million, long-term debt of $3,514.1 million and total equity of $1,752.6 million.
Net cash provided by operating activities amounted to $804.4 million in 2020. During the same timeframe, the company incurred capital expenditures of $222.2 million. The company undertook several cemetery development and construction projects throughout the year. It expects adjusted net cash from operating activities to be $600-$700 million for 2021. Expenditures associated with capital enhancements at current locations and cemetery development are anticipated in a band of $235-$255 million.
Outlook
Management anticipates witnessing continued pandemic-led impacts in the first half of 2021. The company’s guidance range for the year is also wider than usual owing to the uncertainty surrounding the COVID-19 impact. For 2021, Service Corporation envisions adjusted earnings per share of $2.50-$2.90. The company’s earnings came in at $2.91 per share in 2020.
Shares of this renowned deathcare services company have gained 14.7% in the past six months compared with the industry’s growth of 22.7%.
Looking for More Funeral Services Stocks? Check These
Hillenbrand (HI - Free Report) , which carries a Zacks Rank #2, has a long-term earnings growth rate of 12%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Matthews International (MATW - Free Report) has a Zacks Rank #2 and a trailing four-quarter earnings surprise of 43.6%, on average.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>