Service Corporation International (SCI Quick QuoteSCI - Free Report) has been gaining on solid Cemetery revenues as well as the company’s focus on stringent cost control. Apart from this, the deathcare products and services provider remains committed to pursuing strategic buyouts for its Funeral and Cemetery segments, alongside building new funeral homes to generate greater returns.

Notably, the company raised its guidance for 2021 when it delivered sturdy second-quarter results. The Zacks Consensus Estimate for 2021 earnings per share has moved up 16.3% to $3.36 over the past 60 days. The Zacks Rank #2 (Buy) stock has rallied 15.5% in the past three months, outperforming the industry’s increase of 9.1%.

Factors Acting as Upsides

Service Corporation’s Cemetery segment revenues have been increasing for the past few quarters. During the second quarter of 2021, the segment’s revenues rose 34.4% to $455.8 million, thanks to the increased core revenues. The core revenues gained from an increase in both at need and total recognized preneed revenues. The comparable Cemetery revenues climbed 34.4% year over year on the back of higher core revenues. This, in turn, was fueled by elevated recognized preneed revenues owing to the solid comparable preneed cemetery property sales production. Moreover, growth in at need revenues, which stemmed from a rise in burials performed, was an upside.

The comparable preneed cemetery sales production ascended 35.6% on growth in large sales activity, sales averages and sales velocity. The company continued to gain from an efficient sales force, prudent utilization of customer relationship management system, and improved conversion rates from direct mail and digital lead campaigns. Additionally, Service Corporation continued to witness elevated conversion and close rates, thanks to customers’ greater awareness of the possible impact of coronavirus. Solid revenues also fueled segmental gross profit and margin.

Moving toward expansion endeavors, the company incurred capital expenditures of $60.9 million in second-quarter 2021. It undertook several cemetery development and construction projects. These investments are touted to be accretive to Service Corporation in the near term. Expenditures associated with capital enhancements at current locations and cemetery developments are anticipated in the band of $235-$255 million, in 2021.

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Shareholder-Friendly Moves

The company has been committed toward enhancing shareholders’ returns. Management announced a 9.5% dividend hike last month, taking its quarterly dividend rate to 23 cents. Apart from this, Service Corporation has been focused on making share buybacks. During the second quarter, the company spent $116 million toward dividend and share buybacks, including dividends worth nearly $35 million.

Q2 Performance & View

The company posted second-quarter 2021 adjusted earnings of 92 cents per share, which easily surpassed the Zacks Consensus Estimate of 66 cents and increased 58.6% year over year. This year-over-year growth can be attributed to the elevated gross profit associated with a robust increase in the cemetery-recognized preneed revenues. Further, the bottom line gained from reduced shares outstanding, lower interest expenses, a decline in the adjusted effective tax rate, and decreased corporate and general administrative expenses. Total revenues of $987.5 million advanced 20.4% (or $168 million) year over year, backed by increased funeral and cemetery revenues. The figure came in ahead of the Zacks Consensus Estimate of $837 million.

Management is encouraged with the continued strength in the preneed cemetery property sales, which is likely to stay sturdy throughout 2021, together with the robust funeral results. The company now envisions adjusted earnings per share in the range of $3.20-$3.50 compared with the $2.70-$3.00 projected on its first-quarter 2021 earnings call.

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Medifast, Inc. (MED Quick QuoteMED - Free Report) , currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 16%, on average.

Sysco Corporation (SYY Quick QuoteSYY - Free Report) , also carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 13.3%, on average.