Service Corporation International SCI posted splendid fourth-quarter 2021 results, with the top and the bottom line beating the Zacks Consensus Estimate. Revenues and earnings increased on a year-over-year basis.
During the quarter, the company continued to witness escalated levels of funeral services, burials and preneed sales. Considering the persistent impacts of the pandemic, management is raising its 2022 bottom-line view. That said, management highlighted that it is seeing some inflationary cost increases related to staffing, maintenance and energy-associated expenses.
Service Corporation International Price and EPS Surprise
Service Corporation International price-eps-surprise | Service Corporation International Quote
Quarter in Detail
Service Corporation posted adjusted earnings of $1.17 per share, surpassing the Zacks Consensus Estimate of $1.00. The metric increased 4 cents from $1.13 reported in the year-ago quarter. The upside can be attributed to increased gross profit driven by a higher funeral sales average and reduced shares outstanding. These were somewhat offset by the increased tax rate, corporate general and administrative expenses as well as interest expenses.
Total revenues of $1,043.3 million increased 8% year over year from $970.3 million reported in the year-ago quarter. The upside can be attributed to an increased funeral and cemetery revenues. The top line came ahead of the Zacks Consensus Estimate of $1,012.3 million.
Gross profit increased to $324.4 million from $315.4 million reported in the year-ago quarter. Corporate general and administrative costs increased to $35.9 million from $31.1 million mainly due to increased incentive compensation expenses related to long-term incentive plan based on total shareholder return for the year. Operating income of $298.5 million increased from $285.4 million reported in the year-ago quarter.
Consolidated Funeral revenues rose to $599.7 million from $547.8 million reported in the year-ago quarter. Total comparable funeral revenue grew 8.7%, mainly led by growth in core funeral revenues of $31.6 million. Growth in core funeral revenue was driven by an increase in core average revenue per service. Recognized preneed revenues increased 23.6% on improved preneed funeral sales production through the non-funeral home channel.
Comparable preneed funeral sales production increased 13.5%. The upside can be attributed to the persistent positive impact of consumers’ increased awareness associated with the pandemic.
Comparable funeral gross profit increased $9.8 million to $158.9 million. However, gross profit percentage came in at 27%, down from 27.6% reported in the year-ago quarter. Funeral margins were affected by increased costs.
Consolidated Cemetery revenues came in at $443.5 million, up from $422.4 million reported in the year-ago quarter. Comparable cemetery revenues increased 5%, mainly driven by an increase in core revenues. Core revenues increased $21.3 million on greater atneed revenues. We note that atneed revenues gained on higher sales averages and improved velocity of contracts sold. Recognized preneed revenues increased 2.8% owing to increased recognized merchandise and service revenues.
Comparable cemetery gross profit declined to $163.1 million from $164.5 million reported in the year-ago quarter. Comparable gross profit percentage came in at 36.8%, down from 39% reported in the year-ago quarter. Cemetery margins were affected by increased selling compensation owing to growth in preneed cemetery sales production. The company is also witnessing increased costs stemming from normalized staffing and service levels.
Comparable preneed cemetery sales production grew 13.4%, led by increased quality sales averages and the number of contracts sold. Comparable preneed cemetery sales production benefited from a better productive and efficient sales force. Sales averages gained from continued investment in high-quality inventory at moderately-increased price points.
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Other Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $268.6 million, long-term debt of $3,901.3 million and total equity of $1,909.4 million.
Net cash from operating activities amounted to $920.6 million during the 12 months ended Dec 31, 2021. During the same timeframe, the company incurred capital expenditures of $303.7 million.
The company expects the midpoint of adjusted earnings per share (EPS) to come in at $3.00 compared with earnings of $2.80 projected earlier. The company envisions adjusted EPS in the range of $2.80-$3.20 in 2022. We note that the company’s earnings came in at $4.57 per share in 2021. Net cash provided by operating activities (excluding special items) is anticipated in the range of $675-725 million in 2022. Management expects capital improvements at existing locations and cemetery development expenditures in the band of $270-$290 million during this time.
Service Corporation’s shares have fallen 8% in the past three months compared with the industry’s decline of 6.6%.
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The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of about 63% and 49.3%, respectively, from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 17.3%, on average.
Flowers Foods, which produces and markets packaged bakery products, carries a Zacks Rank #2. Shares of Flowers Foods have moved up 3.8% in the past three months.
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