By Thomas A. Parmalee
Service Corporation International reported first-quarter results April 29, and the one big takeaway is this: If you’ve seen a decrease in funeral volumes, it’s not you.
Against that backdrop, however, SCI still performed well, generating adjusted earnings per share of 97 cents compared with 96 cents in the year-ago period – results that would not have been possible without strong preneed production on both the funeral and cemetery side of the business.
The results, however, disappointed Wall Street, as stock analysts had expected the company to earn $1 per share on revenue of $1.11 billion.
Quarterly highlights include:
- Revenue grew $22.3 million to about $1.10 billion, or 2%, over the first quarter of 2025.
- Comparable cemetery preneed sales production increased 10% in the current quarter.
- Comparable total funeral sales average grew 3% over the first quarter of 2025.
- Comparable funeral preneed sales production increased 6% in the current quarter.
- Net cash provided by operating activities increased $22.7 million, or 7% to $333.8 million in the current quarter compared to $311.1 million in the prior-year quarter.
- Adjusted cash provided by operating activities increased $18.5 million, or 6%, to $334.5 million in the current quarter compared to $316 million in the prior year.
Commenting on the results, Chairman and CEO Tom Ryan said, “Comparable funeral service volumes declined 6% year-over-year, reflecting the impact of a particularly strong prior year flu season and aligning with broader demographic trends. Despite this, the company delivered solid underlying performance driven by a resilient average revenue per service and disciplined cost management, with expenses increasing approximately 1% year over year. In addition, preneed funeral sales production remained strong, increasing 6% for the period.”
He continued, “In our cemetery segment, we delivered a strong performance, highlighted by 10% growth in comparable preneed cemetery sales production. This higher production drove 7% growth in comparable cemetery revenue and a 120-basis point improvement in cemetery gross profit.”
While SCI’s quarterly performance was pretty much flat (adjusted earnings went up a penny and net income calculated using generally accepted accounting principles actually went down a penny), Ryan noted that had funeral case volumes remained flat instead of trending down, earnings per share would have been about $1.12 per share, which would have been a 17% percent increase.
The uncertain curve of the death rate is partly why SCI’s guidance range for the year— which it reaffirmed — is so wide at $4.05 to $4.35 diluted earnings per share, excluding special items.
When challenged by a stock analyst on a conference call about the broad range, Ryan noted, “Right now, with the funeral volumes the way they are, you’re probably more likely to be in the lower half of the range versus the higher, but we’re not there yet because, again, if these volumes come back, if we continue the trends we’re seeing in cemetery, we could push in the upper half of this, too.” He added, “So, that’s why we left it where it is. We honestly have a couple of different — a variety of models, and some of which if we get some funeral volume back, we can do really well this year. If you don’t, clearly, you’re going to be on the lower end of that range.”
Even with an anticipated evening out of the death rate, however, SCI said it expects a 1% to 3% decline in funeral volume for the year.
It’s not a market share issue but death rate issue, SCI leaders insisted.
“We don’t have a lot of public competitors, but we do talk to a lot of our friends in the private world, and we’ve got suppliers in different places,” Ryan said. “I’ve mentioned CDC data, we’ve got January and February, and they’re kind of right on where we see – some of our other competitors actually have worse comps. Some of our suppliers have worse comps. So, we feel, number one, that it’s not a market share issue, and therefore, we believe it will bounce back.”
But the bounce back has so far been slow in coming.
“What we saw was out of the gate, really all three months were down,” Ryan said, referring to the first quarter. “I think January and February were a little steeper, and March was slightly better, but still down.”
SCI has seen such periods before, however, and in previous cycles when the first-quarter death rate was down, the second quarter is “still not great,” Ryan said. “You tend to start trending in the back half of the year and seeing that volume come back,” he said. “That’s what we’ve experienced in the previous five times. And I’d tell you right now in April, we’re seeing the same thing. April is still down.”
The decline in services reflects the impact of a strong flu season in the prior-year quarter, Ryan said. “Outside of the COVID-impacted era, over the past 20 years, we have experienced five instances where first-quarter volumes declined from 4% to 9%,” he pointed out. “In each of those periods, we saw a meaningful improvement as the year progressed, with full year results improving by an average of 400 basis points relative to the first quarter’s decline. While each year is different, this pattern reinforces our expectation that performance can improve as we move through the balance of the year.”
Despite the decline in funeral volume, SCI saw the core average revenue per service rise a “healthy” 3.5%, Ryan said, which is more impressive since the core cremation rate increased by a modest 40 basis points.
When one stock analyst pointed asked about the contradiction of lower funeral volumes against the backdrop of robust growth in preneed, Ryan gave preneed seminars a lot of credit.
An important point, however, is the seminars typically aren’t conducted at a funeral home.
“They’re probably at a restaurant, somewhere, a hotel,” Ryan said. “So, the draw that you’re getting for the attendees has nothing to do with your funeral home traffic. So over time, I think we’re pushing more and more of these leads outside of our locations. And therefore, we’re less sensitive to volumes as they walk through the door.”
He also pointed out that SCI only recently got through its transition of working with a new partner in its insurance core business: Global Atlantic. “And we had SCI Direct last year that was transitioning from a trust product to an insurance product,” he said. “So, just think of the forms, the explanation, the presentations. There’s a lot of detail that goes into that, and it was a bit of a distraction over, call it, a 12-to18-month period. And I think what I’m pointing out now is, hey, that’s behind us.”
The average revenue per preneed contract continues to grow, which should drive growth for SCI in the years ahead, Ryan said, noting that as these contracts mature out of backlog, they will have higher cumulative trust earnings.
Cemetery Operations
A bright spot for SCI during the quarter was the performance of its cemeteries, with quarterly revenue increasing by $31 million, or about 7%.
“Core revenues increased by $25 million as a $28 million or 10% increase in recognized preneed revenue was slightly offset by a $3 million decline in at-need revenue,” Ryan said.
The recognized preneed revenue growth came from a $20 million increase in property revenue and another $8 million in higher merchandise and services, SCI reported.
“Other revenue was higher by $6 million compared to the prior year quarter, primarily from an increase in endowment care trust fund income. Comparable preneed cemetery sales production grew an impressive $32 million or 10% in the quarter,” Ryan said, with large sales driving $20 million of the increase and core sales contributing the remaining $12 million.
SCI’s cemetery strength may be a theme that will continue in coming months and even years if early results to cater to cremation families in 10 markets end up being repeatable throughout the organization.
Ryan explained, “It’s our belief based upon some studies and surveys that we did with consumers that there’s a real lack of understanding of what we have to offer to the cremation consumer on the cemetery side,” he said. “So, we worked really hard, and we actually piloted 10 markets in the first quarter. And I would tell you that it was very successful.”
The campaign revolves around communicating with cremation families through advertising, in-lobby presentations, different types of media and presentation materials, Ryan said. “And what we’re seeing was a real difference maker in those 10 markets versus what we saw in the other markets,” he said, adding that the initiative will be piloted in 80 or so additional markets in July.
“When we did this consumer survey research, it really was eye-opening to us, and we learned a lot about, ‘Hey, maybe we’re focusing too much on funeral and burial, and we’ve got to have the tools and the resources to educate these consumers,’” Ryan reflected.
Continued Investment
In the first quarter, SCI invested $66 million of maintenance capital back into its current businesses, according to Eric D. Tanzberger, the company’s executive vice president and chief financial officer.
“Included in this maintenance spend, we invested $41 million into new cemetery development projects, $20 million into our current funeral home and cemetery locations, which improves the overall customer experience, and about $5 million into our digital strategy and some other corporate investments,” he said. “We also invested $17 million of growth capital in the quarter toward the construction of new funeral homes as well as the purchase of some real estate for future new build and expansion opportunities.”
SCI spent $24 million on acquisitions in the quarter, adding locations in several states, including Texas, Massachusetts, Alabama and North Carolina.
“We remain optimistic about the acquisition pipeline and believe we are on pace to achieve our $75 million to $125 million acquisition investment target for 2026,” Tanzberger said.
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