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Service Corp. (SCI) Up 8% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Service Corp. (SCI - Free Report) . Shares have added about 8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Service Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Service Corporation Q4 Earnings Top Estimates, Revenues Up
Service Corporation posted solid fourth-quarter 2023 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.
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Service Corp. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Service Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Service Corp. (SCI) Up 8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Service Corp. (SCI - Free Report) . Shares have added about 8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Service Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Service Corporation Q4 Earnings Top Estimates, Revenues Up
Service Corporation posted solid fourth-quarter 2023 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.
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Service Corp. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Service Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.