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Can Service Corp. (SCI) Run Higher on Rising Earnings Estimates?

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Service Corp. (SCI) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this funeral home and cemetery operator is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Service Corp. As there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $0.45 per share, which is a change of -43.04% from the year-ago reported number.

Over the last 30 days, two estimates have moved higher for Service Corp. compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 25.93%.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $3.36 per share, representing a year-over-year change of +15.46%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, three estimates have moved up for Service Corp. versus no negative revisions. This has pushed the consensus estimate 16.28% higher.

Favorable Zacks Rank

The promising estimate revisions have helped Service Corp. earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for Service Corp. have attracted decent investments and pushed the stock 17.2% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.


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