Service Corporation International ((SCI)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Service Corporation International’s (SCI) recent earnings call highlighted a generally positive financial outlook, despite some challenges. The company reported significant growth in earnings per share, revenue, and cash flow, alongside successful capital investments and cemetery revenue growth. However, declines in preneed funeral sales production, an expected flat or slightly negative funeral volume, and an anticipated higher tax rate were noted as areas of concern.
Earnings Per Share Growth
Service Corporation International reported an increase in adjusted earnings per share, rising from $0.93 in the previous year to $1.06 in the fourth quarter of 2024. This growth signifies the company’s strong financial performance and is a key indicator of its profitability.
Revenue and Gross Profit Increase
Both the funeral and cemetery segments experienced increases in revenues, gross profit, and comparable margin percentages. These improvements contributed significantly to the overall growth in earnings per share, reflecting the company’s effective operational strategies.
Cemetery Revenue Growth
The company saw a $20 million, or about 4%, increase in comparable cemetery revenue, primarily driven by core revenue. This growth highlights the strength of the cemetery segment within SCI’s business portfolio.
Strong Cash Flow and Liquidity
SCI’s adjusted operating cash flow exceeded expectations, reaching $268 million for the fourth quarter. This robust cash flow resulted in a strong financial position, with liquidity totaling approximately $1.6 billion, providing flexibility for future investments and operations.
Successful Capital Investments
The company invested $140 million into current locations, growth opportunities, and acquisitions in the fourth quarter, with a total of $348 million in maintenance capital expenditures for the full year. These investments demonstrate SCI’s commitment to long-term growth and sustainability.
Challenges in Preneed Funeral Sales
A decrease in preneed funeral sales production by $27 million, or about 9%, was reported over the fourth quarter of 2023. This decline was primarily due to the transition to a new preneed insurance provider, presenting a challenge for future sales growth.
Decline in Nonfuneral Home Preneed Sales Revenue
SCI Direct’s nonfuneral home revenue decreased by over $4 million, driven by a $6 million decline in nonfuneral home preneed sales revenue. This decline is a concern for the company’s nontraditional revenue streams.
Funeral Volume Concerns
The company anticipates flat to slightly down funeral volume in 2025 compared to 2024. This expectation indicates potential challenges in maintaining growth in the funeral segment.
Higher Effective Tax Rate Expected
For 2025, SCI anticipates an effective tax rate of about 25.5%, which is 180 basis points higher than in 2024. This increase could impact the company’s net profitability.
Impact of Natural Disasters
Fixed costs rose due to damages at locations affected by natural disasters during the quarter. This increase in costs underscores the financial impact of unforeseen environmental events.
Forward-Looking Guidance
For 2025, Service Corporation International provided a normalized earnings per share guidance range of $3.70 to $4, forecasting a 5% to 13% growth, with a midpoint of 9%. While the company anticipates flat to slightly down funeral volume, cemetery revenue is expected to grow by 2% to 3%, indicating a strategic focus on enhancing cemetery operations amid challenges in the funeral segment.
In summary, Service Corporation International’s earnings call reflects a generally positive financial outlook, marked by growth in earnings per share and strong cash flow. Despite the challenges of declining preneed sales and potential flat funeral volumes, the company’s robust capital investments and cemetery revenue growth highlight its commitment to long-term success. As SCI navigates these challenges, its forward-looking guidance signals confidence in maintaining a trajectory of growth.
