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Service Corp (SCI) Gains From Expansion Initiatives Amid Risks
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Service Corporation International (SCI - Free Report) is well-poised for growth, courtesy of strength in its businesses, growth strategy and focus on expansion. However, rising operating expenses continue to affect the company’s performance.
The Zacks Rank #3 (Hold) company has a market capitalization of $10 billion and belongs to the Zacks Funeral Services industry.
Factors Influencing the Company’s Performance
Service Corp. exited the first quarter of 2023 with better-than-expected earnings and revenues. It has been witnessing growth in preneed sales production and a positive impact on its average revenue per service. As noted by SCI, the number of funeral services performed during the quarter exceeded its expectation.
In the first quarter of 2023, its revenues came in at $1,028.7 million, surpassing the Zacks Consensus Estimate of $1,017 million. However, the metric fell 7.5% year over year. The decline in core funeral volume and comparable preneed cemetery sales production due to lower preneed cemetery property sales production has been affecting its top line.
For 2023, the company reaffirmed its adjusted earnings per share guidance in the range of $3.45-$3.75. Net cash provided by operating activities (excluding special items) is anticipated in the range of $740-$800 million.
The company remains focused on building new funeral homes and improving the facilities of existing ones to cater to its service demand and generate higher returns. For instance, in the first quarter, SCI invested about $9 million to close three transactions in Connecticut, Louisiana and Pennsylvania.
In the first quarter, it invested about $25 million in the construction of new facilities, the purchase of real estate and the expansion of its funeral homes and cemeteries. For 2023, it expects to incur total maintenance, cemetery development and other capital expenditures of $290-$310 million.
Image Source: Zacks Investment Research
However, the company has lost 7.8% compared with the industry’s decline of 6% in the past six months.
The company has been grappling with inflationary pressure for a while now. In the first quarter, its corporate general and administrative costs increased by 6% year-over-year to $44.2 million. This increase was primarily attributable to higher workers’ compensation.
Its gross profit came in at $289.1 million, reflecting a decrease of 23.3% from the year-ago quarter. Driven by these factors, its gross margin contracted 580 basis points to 28.1%. Higher costs and expenses, if not controlled, might continue to affect its margins and profitability in the upcoming quarters.
Also, the company anticipates continued pressure from increasing interest costs on its variable-rate debt, which is likely to have a negative impact of 25 cents on its 2023 earnings per share.
Ingredion is a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions. The Zacks Consensus Estimate for INGR’s current financial-year earnings per share is expected to rise by 22.2% from the corresponding year-ago reported figure.
Celsius Holdings is a leading provider of functional drinks and liquid supplements in the United States. The Zacks Consensus Estimate for CELH’s current financial-year sales suggests 69.6% growth, while earnings per share are expected to increase by 154.4% from the corresponding year-ago reported figures.
Lamb Weston is engaged in producing and marketing value-added frozen potato products worldwide. The Zacks Consensus Estimate for LW’s current financial-year sales and earnings per share are expected to increase by 29.6% and 117.3%, respectively, from the year-ago reported figures.
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Service Corp (SCI) Gains From Expansion Initiatives Amid Risks
Service Corporation International (SCI - Free Report) is well-poised for growth, courtesy of strength in its businesses, growth strategy and focus on expansion. However, rising operating expenses continue to affect the company’s performance.
The Zacks Rank #3 (Hold) company has a market capitalization of $10 billion and belongs to the Zacks Funeral Services industry.
Factors Influencing the Company’s Performance
Service Corp. exited the first quarter of 2023 with better-than-expected earnings and revenues. It has been witnessing growth in preneed sales production and a positive impact on its average revenue per service. As noted by SCI, the number of funeral services performed during the quarter exceeded its expectation.
In the first quarter of 2023, its revenues came in at $1,028.7 million, surpassing the Zacks Consensus Estimate of $1,017 million. However, the metric fell 7.5% year over year. The decline in core funeral volume and comparable preneed cemetery sales production due to lower preneed cemetery property sales production has been affecting its top line.
For 2023, the company reaffirmed its adjusted earnings per share guidance in the range of $3.45-$3.75. Net cash provided by operating activities (excluding special items) is anticipated in the range of $740-$800 million.
The company remains focused on building new funeral homes and improving the facilities of existing ones to cater to its service demand and generate higher returns. For instance, in the first quarter, SCI invested about $9 million to close three transactions in Connecticut, Louisiana and Pennsylvania.
In the first quarter, it invested about $25 million in the construction of new facilities, the purchase of real estate and the expansion of its funeral homes and cemeteries. For 2023, it expects to incur total maintenance, cemetery development and other capital expenditures of $290-$310 million.
Image Source: Zacks Investment Research
However, the company has lost 7.8% compared with the industry’s decline of 6% in the past six months.
The company has been grappling with inflationary pressure for a while now. In the first quarter, its corporate general and administrative costs increased by 6% year-over-year to $44.2 million. This increase was primarily attributable to higher workers’ compensation.
Its gross profit came in at $289.1 million, reflecting a decrease of 23.3% from the year-ago quarter. Driven by these factors, its gross margin contracted 580 basis points to 28.1%. Higher costs and expenses, if not controlled, might continue to affect its margins and profitability in the upcoming quarters.
Also, the company anticipates continued pressure from increasing interest costs on its variable-rate debt, which is likely to have a negative impact of 25 cents on its 2023 earnings per share.
Stocks to Consider
Some better-ranked stocks are Ingredion Incorporated (INGR - Free Report) , Celsius Holdings, Inc. (CELH - Free Report) and Lamb Weston Holdings, Inc. (LW - Free Report) . INGR sports a Zacks Rank #1 (Strong Buy) and CELH and LW, each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ingredion is a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions. The Zacks Consensus Estimate for INGR’s current financial-year earnings per share is expected to rise by 22.2% from the corresponding year-ago reported figure.
Celsius Holdings is a leading provider of functional drinks and liquid supplements in the United States. The Zacks Consensus Estimate for CELH’s current financial-year sales suggests 69.6% growth, while earnings per share are expected to increase by 154.4% from the corresponding year-ago reported figures.
Lamb Weston is engaged in producing and marketing value-added frozen potato products worldwide. The Zacks Consensus Estimate for LW’s current financial-year sales and earnings per share are expected to increase by 29.6% and 117.3%, respectively, from the year-ago reported figures.