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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 2023 results as both the top and bottom lines increased year over year and came ahead of their respective Zacks Consensus Estimate. Results were largely driven by elevated preneed cemetery sales production, which fueled the gross profit.
Q4 in Detail
Service Corporation posted adjusted earnings of 93 cents per share, surpassing the Zacks Consensus Estimate of 89 cents. The metric increased by a penny from the year-ago quarter. The upside was driven by increased cemetery gross profit and a reduced share count, partly offset by lower funeral gross profit, increased interest expenses and expected declines in pandemic-related activity.
Total revenues of $1,055.8 million increased 2.7% from $1,027.7 million reported in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $1,020 million.
Service Corporation International Price, Consensus and EPS Surprise
The gross profit increased to $287.6 million from almost $280.1 million reported in the year-ago quarter.
Corporate general and administrative costs were $45.1 million, which declined by $62.8 million year over year. Excluding charges related to some legal matters, the metric increased by $1.8 million, mainly due to the company’s long-term incentive compensation plan.
The operating income of $242.1 million increased 44.9% from around $167 million reported in the year-ago quarter. We had expected operating income growth of 40.2% for the fourth quarter.
Segment Discussion
Consolidated Funeral revenues came in at $573.2 million in the fourth quarter, down from $580.2 million reported in the year-ago period. This could be attributed to lower core revenues stemming from a decline in atneed revenues. We expected fourth-quarter funeral revenues to drop 3.3% to $560.8 million in the quarter under review.
Total comparable funeral revenues fell 2.2%, mainly due to a fall in core funeral revenues. Core funeral revenues decreased 2.1% due to a decline in core funeral services performed (resulting from lower pandemic-related activity). This was somewhat countered by growth in the core average revenue per service.
Comparable preneed funeral sales production grew 4.2%. Core preneed sales production increased by 3.5%, and non-funeral home preneed sales production jumped 6.8%. These upsides can be attributed to increased sales averages and greater contract velocity.
Comparable funeral gross profit came in at $122.3 million, down $8.3 million. The gross profit margin contracted 100 basis points (bps) to 21.7%, mainly due to lower abovementioned revenues, partly negated by reduced fixed costs and lower incentive compensation costs.
Consolidated Cemetery revenues came in at $482.6 million, up from $447.5 million reported in the year-ago quarter. We expected cemetery revenues to climb 1.5% year over year to $454.2 million in the fourth quarter.
Comparable cemetery revenues increased 7.7%. The upside was mainly caused by increased core revenues to the tune of $31.5. Core revenues increased due to growth in total recognized preneed revenues, partially hurt by reduced atneed revenues.
Comparable preneed cemetery sales production rose 9.4% due to continued strength in large sales activity, along with a higher core production sales average.
Comparable cemetery gross profit came in at $165.5 million, up $17 million. The gross profit margin expanded 110 bps to 34.4%.
Other Financial Details
Service Corporation ended the quarter with cash and cash equivalents of $221.6 million, long-term debt of $4,649.2 million and total equity of $1,541.5 million.
Net cash from operating activities (excluding special items) amounted to $882.3 million during the 12 months ended Dec 31, 2023. During the same period, the company incurred total capital expenditures of $361.8 million.
Guidance
Service Corporation expects 2024 earnings per share (EPS), excluding special items, in the range of $3.50-$3.80. We note that the company’s earnings came in at $3.47 per share in 2023.
Net cash provided by operating activities (excluding special items and cash taxes) is anticipated in the range of $935-$985 million. Net cash provided by operating activities (excluding special items) is expected in the range of $900-$960 million.
Management expects total maintenance capital expenditures of $325 million for 2024.
Shares of this Zacks Rank #3 (Hold) company have rallied 8.5% in the past six months compared with the industry’s increase of 1%.
3 Solid Picks
Chewy (CHWY - Free Report) , a trusted destination for pet parents and partners everywhere, currently sports a Zacks Rank #1 (Strong Buy). CHWY has a trailing four-quarter earnings surprise of 234.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chewy’s current financial-year sales and earnings indicates growth of 10.3% and 11.3%, respectively, from the year-ago reported numbers.
Casey's General Stores (CASY - Free Report) , the third largest convenience retailer and fifth largest pizza chain in the United States, currently carries a Zacks Rank #2 (Buy). CASY has a trailing four-quarter earnings surprise of 17.8%, on average.
The Zacks Consensus Estimate for Casey's current financial-year sales and earnings suggests growth of around 0.3% and 9%, respectively, from the year-ago reported numbers.
Lamb Weston (LW - Free Report) , which produces, distributes and markets frozen potato products, holds a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 28.8%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the year-ago reported numbers.
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Service Corporation (SCI) Q4 Earnings Top Estimates, Revenues Up
Service Corporation International (SCI - Free Report) posted solid fourth-quarter 2023 results as both the top and bottom lines increased year over year and came ahead of their respective Zacks Consensus Estimate. Results were largely driven by elevated preneed cemetery sales production, which fueled the gross profit.
Q4 in Detail
Service Corporation posted adjusted earnings of 93 cents per share, surpassing the Zacks Consensus Estimate of 89 cents. The metric increased by a penny from the year-ago quarter. The upside was driven by increased cemetery gross profit and a reduced share count, partly offset by lower funeral gross profit, increased interest expenses and expected declines in pandemic-related activity.
Total revenues of $1,055.8 million increased 2.7% from $1,027.7 million reported in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $1,020 million.
Service Corporation International Price, Consensus and EPS Surprise
Service Corporation International price-consensus-eps-surprise-chart | Service Corporation International Quote
The gross profit increased to $287.6 million from almost $280.1 million reported in the year-ago quarter.
Corporate general and administrative costs were $45.1 million, which declined by $62.8 million year over year. Excluding charges related to some legal matters, the metric increased by $1.8 million, mainly due to the company’s long-term incentive compensation plan.
The operating income of $242.1 million increased 44.9% from around $167 million reported in the year-ago quarter. We had expected operating income growth of 40.2% for the fourth quarter.
Segment Discussion
Consolidated Funeral revenues came in at $573.2 million in the fourth quarter, down from $580.2 million reported in the year-ago period. This could be attributed to lower core revenues stemming from a decline in atneed revenues. We expected fourth-quarter funeral revenues to drop 3.3% to $560.8 million in the quarter under review.
Total comparable funeral revenues fell 2.2%, mainly due to a fall in core funeral revenues. Core funeral revenues decreased 2.1% due to a decline in core funeral services performed (resulting from lower pandemic-related activity). This was somewhat countered by growth in the core average revenue per service.
Comparable preneed funeral sales production grew 4.2%. Core preneed sales production increased by 3.5%, and non-funeral home preneed sales production jumped 6.8%. These upsides can be attributed to increased sales averages and greater contract velocity.
Comparable funeral gross profit came in at $122.3 million, down $8.3 million. The gross profit margin contracted 100 basis points (bps) to 21.7%, mainly due to lower abovementioned revenues, partly negated by reduced fixed costs and lower incentive compensation costs.
Consolidated Cemetery revenues came in at $482.6 million, up from $447.5 million reported in the year-ago quarter. We expected cemetery revenues to climb 1.5% year over year to $454.2 million in the fourth quarter.
Comparable cemetery revenues increased 7.7%. The upside was mainly caused by increased core revenues to the tune of $31.5. Core revenues increased due to growth in total recognized preneed revenues, partially hurt by reduced atneed revenues.
Comparable preneed cemetery sales production rose 9.4% due to continued strength in large sales activity, along with a higher core production sales average.
Comparable cemetery gross profit came in at $165.5 million, up $17 million. The gross profit margin expanded 110 bps to 34.4%.
Other Financial Details
Service Corporation ended the quarter with cash and cash equivalents of $221.6 million, long-term debt of $4,649.2 million and total equity of $1,541.5 million.
Net cash from operating activities (excluding special items) amounted to $882.3 million during the 12 months ended Dec 31, 2023. During the same period, the company incurred total capital expenditures of $361.8 million.
Guidance
Service Corporation expects 2024 earnings per share (EPS), excluding special items, in the range of $3.50-$3.80. We note that the company’s earnings came in at $3.47 per share in 2023.
Net cash provided by operating activities (excluding special items and cash taxes) is anticipated in the range of $935-$985 million. Net cash provided by operating activities (excluding special items) is expected in the range of $900-$960 million.
Management expects total maintenance capital expenditures of $325 million for 2024.
Shares of this Zacks Rank #3 (Hold) company have rallied 8.5% in the past six months compared with the industry’s increase of 1%.
3 Solid Picks
Chewy (CHWY - Free Report) , a trusted destination for pet parents and partners everywhere, currently sports a Zacks Rank #1 (Strong Buy). CHWY has a trailing four-quarter earnings surprise of 234.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chewy’s current financial-year sales and earnings indicates growth of 10.3% and 11.3%, respectively, from the year-ago reported numbers.
Casey's General Stores (CASY - Free Report) , the third largest convenience retailer and fifth largest pizza chain in the United States, currently carries a Zacks Rank #2 (Buy). CASY has a trailing four-quarter earnings surprise of 17.8%, on average.
The Zacks Consensus Estimate for Casey's current financial-year sales and earnings suggests growth of around 0.3% and 9%, respectively, from the year-ago reported numbers.
Lamb Weston (LW - Free Report) , which produces, distributes and markets frozen potato products, holds a Zacks Rank #2. LW has a trailing four-quarter earnings surprise of 28.8%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the year-ago reported numbers.