Service Corporation (SCI) Gains 10% in 3 Months: Here's Why
Service Corporation International SCI has been benefiting from its focus on expansion and strength in funeral services performed. In the third quarter of 2022, revenues declined year over year, mainly due to a tough comparison with the year-ago period, which was impacted by increased pandemic-led deaths.
The company witnessed better-than-expected growth compared with the third quarter of 2019 (pre-pandemic period). On its third-quarter earnings call, management stated that the number of funeral services performed is trending better than expectations. Also, cemetery preneed sales production remains strong. Encouragingly, management raised its guidance for 2022.
Service Corporation now expects adjusted earnings per share (EPS) in the range of $3.60-$3.80, up from the earlier guided range of $3.30-$3.70. We note that the company’s earnings came in at $4.57 per share in 2021.
The Zacks Consensus Estimate for the 2022 EPS has jumped from $3.49 to $3.68 over the past 30 days. Shares of the deathcare products and services provider have rallied 10.2% in the past three months, in line with the industry’s rise.
Service Corporation International Price, Consensus and EPS Surprise
Service Corporation International price-consensus-eps-surprise-chart | Service Corporation International Quote
Focus on Expansion
Service Corporation remains committed to pursuing strategic buyouts for both its segments and building new funeral homes to generate greater returns. During the nine months ended Sep 30, 2022, SCI incurred capital expenditures of $252.8 million, which included higher capital improvements at existing field locations, corporate systems development and cemetery development expenditures.
Management now expects capital improvement at existing field locations, corporate systems development and cemetery development expenditures in the band of $280-$300 million in 2022 compared with the $270-$290 million range projected earlier.
Moving to acquisitions, Service Corporation concluded a small $2-million deal in the mid-Atlantic region in the second quarter of 2022. After the third quarter, it purchased several funeral home and cemetery locations on the West Coast for nearly $40 million. On its third-quarter earnings call, management stated that it remains encouraged about its acquisition pipeline.
In 2018, the company had deployed approximately $200 million toward acquisitions. Some notable acquisitions made by the company in the past include Alderwoods Group, Keystone North America, The Neptune Society and Stewart Enterprises. Also, buyouts in the cemetery segment are aimed at exploiting increased opportunities to cater to Baby Boomers.
We believe that the abovementioned upsides are likely to fuel growth for this Zacks Rank #2 (Buy) company.
Looking for Other Consumer Staple Stocks? Check These
Some other similar-ranked stocks from the sector are General Mills GIS, Conagra Brands CAG and The J. M. Smucker Company SJM.
General Mills, a manufacturer and marketer of branded consumer foods, currently has a Zacks Rank #2. GIS has a trailing four-quarter earnings surprise of 6.1%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and earnings suggests growth of 2.7% and 3.8%, respectively, from the comparable year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, carries a Zacks Rank #2 at present. CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported numbers.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year sales suggests growth of 5.6% from the year-ago reported figure.
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