Service International (NYSE:SCI) Reports Second-Quarter Sales in Line with Estimates

Service International (NYSE:SCI) Reports Second-Quarter Sales in Line with Estimates

Funeral services company Service International (NYSE:SCI) reported Q2 CY2024 results in line with analysts’ expectations, with revenue up 2% year-over-year to $1.03 billion. It had non-GAAP earnings of $0.79 per share, down from earnings of $0.83 per share in the same quarter last year.

Is now the time to buy Service International? Find out in our full research report.

Service International (SCI) Second Quarter 2024 Calendar Year Highlights:

• Revenue: $1.03 billion vs. analyst estimates of $1.03 billion (small beat)

• EPS (non-GAAP): $0.79 vs analyst expectations of $0.87 (8.8% error)

• EPS Guidance (Non-GAAP) for the full year is $3.65 at the midpoint, roughly in line with what analysts expected

• Gross Margin (GAAP): 24.9%, down from 25.8% in the same quarter last year

• Free cash flow of US$ 100.8 million, a decrease of 28.2% compared to the previous quarter

• Funeral services performed: 86,031, down 1,039 from the previous year

• Market capitalization: US$ 11.65 billion

Founded in 1962, Service International (NYSE: SCI) is a leading provider of funeral care products and services in North America.

Specialized Consumer Services

Some consumer discretionary companies don’t fit neatly into a category because their products or services are unique. While their offerings may be niche, these companies have often found more efficient or technology-enabled ways to make or sell something that has been around for a while. Technology can be a double-edged sword, as it can lower the barriers to entry for new competitors and allow them to better serve customers.

Sales growth

A company’s long-term performance can be an indicator of its business quality. Any company can have a good quarter or two, but many long-lasting companies tend to grow for years. Over the past five years, Service International has grown its sales at a weak compound annual growth rate of 5.2%. This shows that it has failed to expand significantly and is a rough starting point for our analysis.

Total International Service Revenue

We at StockStory place more emphasis on long-term growth, but within consumer discretionary, a stretched historical view can miss a company that is riding the wave of a new blockbuster product or emerging trend. Service International’s recent track record shows that its demand has slowed as its revenue has been flat over the past two years.

We can better understand the company’s revenue dynamics by looking at its number of funeral services performed, which reached 86,031 in the last quarter. Over the past two years, Service International’s funeral services performed have averaged a 3.4% year-over-year decline. Since this number is lower than its revenue growth during the same period, we can see that the company’s monetization has increased.

The story continues

International Funeral Services Performed

This quarter, Service International grew its revenue by 2% year over year, and its revenue of $1.03 billion was in line with Wall Street estimates. Looking ahead, Wall Street expects sales to grow 2.9% over the next 12 months.

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Cash is king

While profits are undoubtedly valuable in assessing a company’s performance, we believe that cash is king because you can’t use accounting profits to pay the bills.

Service International has demonstrated decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin has averaged 10.8% over the past two years, slightly better than the broader consumer discretionary sector.

International Services Free Cash Flow Margin

Service International’s free cash flow was $100.8 million in Q2, equivalent to a margin of 9.7%. This quarter’s result was good, as its margin was 5.3 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Key Takeaways from Service International’s Second Quarter Results

We struggled to find many strong positives in these results. Its EPS fell short, and its number of funeral services performed fell short of Wall Street estimates. Overall, this was a poor quarter for Service International. Shares traded down 2.6% to $78 immediately following the results.

Service International may have had a tough quarter, but does that really create an opportunity to invest now? When making this decision, it’s important to consider its valuation, business qualities, as well as what happened in the last quarter. We cover this in our full, actionable research report, which you can read here, it’s free.

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