Service Corporation International (SCI) Earnings & Analysis

Latest quarter

Service Corporation International reported Q3 FY2026 revenue that missed the consensus by −0.34%. Adjusted earnings per share were $0.97, below the consensus estimate of $0.98. SCI’s revenue rose to $1,107.3 million from $1,058.1 million a year earlier, while diluted earnings per share increased to $1.03 from $0.83.

The filing shows funeral revenue rose as comparable locations generated more revenue per service, despite a slight decline in the number of comparable services performed. Cemetery revenue also increased, helped by recognized preneed revenue and higher endowment care trust fund income.

SCI’s gross margin declined to 24.6% from 25.1%, while its operating margin increased to 22.8% from 21.4%. The filing attributes the decline in comparable cemetery gross margin partly to higher selling compensation, advertising and health insurance expenses. It also reports lower corporate general and administrative expenses, driven primarily by lower incentive compensation expense and a favorable legal settlement.

SCI reported quarterly free cash flow of $197.4 million, up from $150.7 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Thomas Ryan said quarterly revenue and earnings fell below SCI’s internal expectations because of lower-than-anticipated funeral volumes, lower general agency commission rates, higher fixed and selling costs, and greater deferral of cemetery sales revenue. He said comparable core funeral volume fell 0.5% from a year earlier, but SCI’s internal analysis indicated it had maintained market share.

Ryan said comparable preneed funeral sales production rose 6% and comparable preneed cemetery sales production rose 5% in the quarter. Preneed arrangements are purchased before they are needed. He said a larger share of cemetery sales growth came from merchandise, services and undeveloped property, for which revenue is deferred, while more selling compensation is recognized immediately. Ryan described this as an “unfavorable timing mismatch between the recognition of selling costs and the associated revenue.”

On margins, Ryan said SCI’s move to guaranteed hourly wages added to selling compensation rates in both funeral and cemetery operations. He said cemetery fixed costs also rose because of healthcare expenses and spending on a cremation memorialization project.

Asked about the costs, Ryan said the project includes advertising and displays showing cremation gardens, while additional funeral seminars are generating leads. He said SCI would review spending and pass along some inflationary costs through pricing. On another question about revenue recognition, he said SCI could encourage counselors to sell more cemetery property that is ready for delivery.

CFO Eric Tanzberger said SCI spent $34 million on acquisitions during the quarter, adding funeral and cemetery locations in Michigan, Illinois, Florida and Indiana. He also said cemetery installment payments and down payments were coming in above expectations.

For the quarter ahead, Ryan said recent fixed-cost trends were expected to continue. He said promotional costs above expectations would probably remain about the same in the fourth quarter.

Guidance

SCI now expects full-year 2026 adjusted earnings per share of $3.94 to $4.04. Ryan said the normalized earnings midpoint is approximately $3.99, compared with the $4.20 midpoint SCI provided in February. He attributed the reduction to lower-than-anticipated funeral volumes and expense trends, including higher healthcare, sales promotion and fuel costs.