SCI — Service Corporation International

Summary of SCI Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Earnings Per Share (EPS): $0.97, slightly up from $0.96 in Q1 2025.
• Cemetery Revenue: Increased by $31 million (7%), driven by double-digit growth in preneed cemetery sales.
• Funeral Revenue: Decreased by $17 million (3%), primarily due to a 6.6% decline in core funeral services performed.
• Gross Profit: Funeral gross profit declined by approximately $23 million, while cemetery gross profit increased by $15 million (11%).
• Adjusted Operating Cash Flow: $335 million, a 6% increase year-over-year.
• Capital Investments: $108 million, including $66 million in maintenance capital and $24 million in acquisitions.
• Shareholder Returns: $190 million returned through share repurchases ($143 million) and dividends ($47 million).

2. Strategic Updates and Business Highlights

• Preneed Sales Growth: Strong performance in preneed funeral and cemetery sales, with preneed funeral sales production up by $18 million (6%).
• Cost Management: Effective control over controllable expenses helped mitigate margin impacts despite declining funeral volumes.
• Community Engagement: Increased focus on seminars and community outreach to drive sales, particularly for preneed services.
• Cremation Strategy: New initiatives targeting the cremation market are showing early success, with plans to expand into more markets.

3. Forward Guidance and Outlook

• 2026 EPS Guidance: Reaffirmed range of $4.05 to $4.35, with expectations of a 1% to 3% decline in funeral volumes for the year.
• Cemetery Sales Outlook: Anticipated mid-single-digit growth (4% to 7%) for the year, supported by strong preneed performance.
• Cash Flow Guidance: Confirmed adjusted operating cash flow guidance of $1.0 billion to $1.06 billion for 2026.

4. Challenges and Points of Concern

• Funeral Volume Decline: Experienced a mid-single-digit decline in case volume, attributed to a strong flu season in the prior year and broader mortality trends.
• Margin Pressures: Funeral gross profit margins decreased, with expectations of slight declines for the year due to lower volumes.
• Market Conditions: Competitive pressures remain, with some competitors experiencing worse performance, although SCI does not believe it has lost market share.

5. Notable Q&A Insights

• Volume Trends: Management indicated that funeral volumes were down across all three months of Q1, with expectations for improvement in the latter half of the year based on historical patterns.
• Large Sales Performance: Large cemetery sales contributed significantly to revenue growth, but their timing remains unpredictable.
• Trust Fund Returns: Trust fund returns declined in Q1 but showed signs of recovery in April, aligning with expectations for the full year.
• Cost Management: The company has effective systems in place to manage labor costs and other expenses in response to volume fluctuations.

Overall, SCI demonstrated resilience in its business model despite facing headwinds in funeral volumes, with strong growth in preneed sales and effective cost management strategies. The company remains optimistic about its ability to navigate challenges and achieve its financial targets for 2026.