Service International’s first quarter results were met with a negative market reaction despite surpassing Wall Street’s expectations for both revenue and adjusted earnings. Management attributed the quarter’s performance primarily to strong growth in funeral service volumes and higher average revenue per service, which offset weaker results in the cemetery segment. CEO Thomas Ryan highlighted the impact of ongoing operational changes, including the transition to an insurance-funded pre-need model, as well as disciplined cost management that helped expand operating margins. Ryan noted, "This core average growth was achieved despite a modest increase of 40 basis points in the core cremation rate."
Is now the time to buy SCI? Find out in our full research report (it’s free).
Service International (SCI) Q1 CY2025 Highlights:
- Revenue: $1.07 billion vs analyst estimates of $1.06 billion (2.8% year-on-year growth, 1.3% beat)
- Adjusted EPS: $0.96 vs analyst estimates of $0.91 (5.7% beat)
- Adjusted EBITDA: $326.5 million vs analyst estimates of $321.9 million (30.4% margin, 1.4% beat)
- Management reiterated its full-year Adjusted EPS guidance of $3.85 at the midpoint
- Operating Margin: 23.4%, up from 22.2% in the same quarter last year
- Funeral Services Performed: 97,854, up 3,488 year on year
- Market Capitalization: $11.35 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Service International’s Q1 Earnings Call
- Joanna Gajuk (Bank of America) asked about the decline in large cemetery preneed sales and the impact of regional disruptions. CEO Thomas Ryan explained volatility in large sales is normal, and April sales have rebounded, while Rose Hills operations remained stable despite wildfires.
- Scott Schneeberger (Oppenheimer) inquired about funeral volume swings and market share trends. Ryan pointed to gradual market share gains and diminishing COVID-related effects, noting quarter-to-quarter volatility but optimism for the year.
- A.J. Rice (UBS) questioned the scale of insurance premium from pre-need contracts and the impact on average revenue per case. Ryan stated the transition is ongoing but expects meaningful growth as more contracts mature and new policies are adopted.
- Tobey Sommer (Truist Securities) asked about sales force initiatives and seasonality in cemetery revenue recognition. Ryan highlighted investments in lead management and technology, while CFO Eric Tanzberger expects recognition rates to remain stable year-over-year.
- Parker Snure (Raymond James) sought clarity on potential trade-down behaviors and M&A contributions. Ryan noted little historical evidence of trade-down in at-need funeral services, and expects M&A to add 1% to 3% to annual growth depending on deal flow.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will monitor (1) the pace of recovery in preneed sales production as the insurance transition nears completion, (2) the timing and magnitude of large cemetery sales, especially in key markets like Rose Hills, and (3) the company’s ability to offset input cost headwinds from tariffs and inflation through pricing and sourcing strategies. Progress in sales force retention and technology adoption will also be important indicators.
Service International currently trades at $79.76, in line with $79.70 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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