Service Corporation International, the largest provider of death-care products and services in North America, reported its third-quarter results Nov. 2, 2022.
Tom Ryan, the company’s chairman and CEO, commented on the third-quarter performance, noting, “We are proud to report GAAP earnings per share of $0.76 and adjusted earnings per share of $0.68 and net cash provided by operating activities of $183 million for the third quarter of 2022. These results significantly exceeded our expectations; however, they are below the prior year quarter that was materially impacted by the effects of COVID-19.”
Ryan noted that comparing back to the pre-pandemic third quarter of 2019, the company has exceeded its expected growth. Highlights include:
- Adjusted earnings per share has grown 22% on a compounded annual basis since 2019 (compared to an expectation of 8%-12%).
- The number of funeral services performed is trending higher than the company anticipated and is approximately 5% higher than 2019 levels on a compounded annual growth basis.
- Cemetery preneed sales production continues to be strong, growing 5% in the third quarter versus a COVID impacted prior year quarter and has experienced nearly 19% compounded annual growth over 2019 levels.
SCI announced that it is raising the midpoint of its full year 2022 adjusted earnings guidance by 20 cents to $3.70 and the midpoint of its adjusted operating cash flow guidance by $40 million to $815 million. “These increases are driven by the strong earnings performance in the first nine months, particularly around higher than anticipated funeral services performed,” Ryan said.
Other quarterly highlights include comparable preneed cemetery sales production increased $16 million, or 5% and comparable preneed funeral sales production grew $6 million, or 2%. The company also reported the following:
- Diluted earnings per share were $0.76 in the third quarter of 2022 compared to $1.23 in the third quarter of 2021. The current year quarter was impacted by $14.4 million of net gains on divestitures and impairment charges. The prior year quarter was impacted by $7.8 million of net gains on divestitures and impairment charges and $8.3 million in other income received from a vendor waiver and release agreement. Diluted earnings per share excluding special items was $0.68 in the third quarter of 2022 compared to $1.16 in the third quarter of 2021. The decline of $0.48 is primarily due to an expected decline in gross profit related to decreases in COVID-19 related activity combined with higher inflationary costs and lower trust fund income impacted by negative financial market returns. Additionally, fewer shares outstanding more than offset the impact of higher interest expense.
- Net cash provided by operating activities declined $58 million to $182.6 million in the third quarter of 2022 compared to $240.6 million in the third quarter of 2021. The prior year quarter benefited from a cash receipt of $8.3 million from a vendor waiver and release agreement. Net cash provided by operating activities excluding special items was $182.6 million in the third quarter of 2022 compared to $232.3 million in the third quarter of 2021. The decrease in operating cash flow is primarily due to lower operating income and higher cash interest offset by lower cash tax payments and favorable working capital.