Breaking Down Service Corporation International (SCI) Financial Health: Key Insights for Investors

Are you an investor keen on understanding the financial stability and growth potential of Service Corporation International (SCI)? In 2024, the company reported adjusted earnings per share of $3.53 and adjusted operating cash flow of $977 million. Revenue increased by $37 million, a 4% rise compared to the fourth quarter of 2023. Want to delve deeper into these figures and what they mean for future investment strategies? Keep reading to uncover key insights into SCI's financial performance and outlook.

Service Corporation International (SCI) Revenue Analysis

Service Corporation International (SCI) primarily generates revenue through funeral and cemetery services. These services include funeral arrangements, cremation services, memorialization products, and interment rights. Understanding the breakdown of these revenue streams is crucial for assessing the company's financial health and stability.

For Service Corporation International (SCI), analyzing the year-over-year revenue growth rate provides insights into its performance trends. Monitoring the percentage increase or decrease in revenue helps investors understand the company's ability to expand its market presence and adapt to changing consumer preferences. Here's a look at SCI's recent revenue trends:

• In 2024, Service Corporation International reported total revenue of $4.2 billion.
• The company’s financial performance in 2024 was marked by a slight decrease in revenue compared to 2023.
• SCI's total revenue for the year 2023 was $4.24 billion, which shows that the revenue decreased by 1% from 2023 to 2024.

Service Corporation International (SCI) operates through two main business segments: funeral services and cemetery services. Analyzing the contribution of each segment to the overall revenue provides valuable insights into the company's operational strengths and areas of focus. Here is a table illustrating the revenue split between the two segments:

In 2024, the Funeral segment accounted for approximately 57% of the total revenue, amounting to $2.4 billion. Meanwhile, the Cemetery segment contributed about 43%, generating $1.8 billion. Understanding the dynamics between these segments helps investors gauge the diversification and resilience of SCI's revenue streams.

Changes in revenue streams can significantly impact a company's financial performance. For Service Corporation International (SCI), it is important to monitor any notable shifts in revenue sources, such as increased demand for cremation services or changes in memorialization product sales. Here are some potential changes and factors influencing SCI's revenue streams:

• Shift in consumer preferences: Increasing preference for cremation over traditional burial services.
• Economic factors: Impact of economic downturns on families' ability to afford premium funeral services.
• Acquisitions and expansions: Revenue generated from newly acquired funeral homes and cemeteries.
• Demographic trends: Changes in the aging population and mortality rates affecting service demand.

By analyzing these factors, investors can gain a comprehensive understanding of Service Corporation International’s (SCI) revenue dynamics and make informed decisions. For more insights into the investment profile of SCI, consider exploring: Exploring Service Corporation International (SCI) Investor Profile: Who’s Buying and Why?

Service Corporation International (SCI) Profitability Metrics

Understanding Service Corporation International's (SCI) financial health requires a close examination of its profitability metrics. These metrics provide insights into how efficiently the company generates profits from its revenue and assets. Let's delve into the key profitability measures, trends, and comparisons to industry standards, using the most recent data available for the fiscal year 2024.

Gross Profit Margin: The gross profit margin is a fundamental indicator of a company's ability to generate profit from its cost of goods sold (COGS). It is calculated as (Gross Profit / Revenue) 100. For SCI, analyzing the trend in gross profit margin helps to understand how well the company manages its direct costs related to services provided.

Operating Profit Margin: The operating profit margin, calculated as (Operating Profit / Revenue) 100, reflects the company's profitability from its core business operations, excluding interest and taxes. It indicates how efficiently SCI manages its operating expenses. A rising operating profit margin suggests improved operational efficiency.

Net Profit Margin: The net profit margin, calculated as (Net Profit / Revenue) 100, represents the percentage of revenue that translates into profit after all expenses, including interest and taxes, are accounted for. It is a comprehensive measure of overall profitability. SCI's net profit margin trend indicates its ability to convert revenue into bottom-line profit.

A comparison of these profitability ratios with industry averages provides context. If SCI's margins are higher than the industry average, it suggests a competitive advantage. Conversely, lower margins may indicate areas for improvement in cost management or pricing strategies.

Analysis of operational efficiency involves scrutinizing cost management practices and gross margin trends. Effective cost management directly impacts profitability. For example, improvements in supply chain management or reductions in administrative costs can boost profit margins. Consistent monitoring of gross margin trends helps identify potential issues in pricing or cost control.

Investors can also benefit from understanding Mission Statement, Vision, & Core Values of Service Corporation International (SCI).

Service Corporation International (SCI) Debt vs. Equity Structure

Understanding how Service Corporation International (SCI) manages its debt and equity is crucial for investors. This involves analyzing the company's debt levels, comparing its debt-to-equity ratio to industry standards, and noting any recent financing activities.

As of fiscal year 2024, Service Corporation International's (SCI) financial structure includes a mix of debt and equity. Here's a detailed breakdown:

• Total Debt: SCI has a significant amount of debt, which includes both short-term and long-term obligations.
• Long-Term Debt: A substantial portion of SCI's debt is long-term, reflecting investments in infrastructure and acquisitions.
• Short-Term Debt: SCI also manages short-term debt, which is used for immediate operational needs and short-term liabilities.

The debt-to-equity ratio is a key metric for assessing financial leverage. It indicates the proportion of equity and debt a company uses to finance its assets. A lower ratio typically suggests a more stable financial position.

• Debt-to-Equity Ratio: SCI's debt-to-equity ratio is an important indicator of its financial risk.
• Industry Comparison: Benchmarking this ratio against the industry average provides insights into whether SCI is more or less leveraged than its peers.

Recent financial activities, such as debt issuances and credit ratings, offer clues about SCI's financial strategy and health.

• Debt Issuances: Any recent debt issuances by SCI could indicate expansion plans or refinancing activities.
• Credit Ratings: Credit ratings from agencies like Moody's or Standard & Poor's reflect the creditworthiness of SCI.
• Refinancing: Refinancing activities can help SCI lower its interest expenses and manage its debt more efficiently.

Balancing debt and equity is vital for sustainable growth. Here’s how SCI manages this balance:

• Strategic Financing: SCI strategically uses debt to fund acquisitions and capital expenditures, while equity supports long-term stability.
• Financial Health: Maintaining an optimal mix of debt and equity ensures the company’s financial health and flexibility.

For further insights into Service Corporation International's (SCI) financial health, you can read more at: Breaking Down Service Corporation International (SCI) Financial Health: Key Insights for Investors

Service Corporation International (SCI) Liquidity and Solvency

Assessing Service Corporation International's (SCI) liquidity involves examining key financial ratios and trends to understand its ability to meet short-term obligations. A comprehensive liquidity analysis includes current and quick ratios, working capital trends, and cash flow statement reviews.

Here's an overview of SCI's liquidity position:

• Mission Statement, Vision, & Core Values of Service Corporation International (SCI).

Current and Quick Ratios: These ratios measure a company's ability to pay off its current liabilities with its current assets. While specific current and quick ratios for 2024 are not available in the provided context, these ratios are standard measures for assessing liquidity.

Analysis of Working Capital Trends: Monitoring working capital trends helps to assess the operational efficiency and short-term financial health of SCI. Working capital is calculated as current assets minus current liabilities. For instance, the working capital is calculated using the formula: (Total Current Assets - Total Current Liabilities), /, Total Assets = (7869.481 - 15096.169), /, 362460.345 = -0.0199.

Cash Flow Statements Overview:

The cash flow statement is divided into three main sections:

• Operating Activities
• Investing Activities
• Financing Activities

Here’s a summary of SCI's cash flow trends based on the 2024 data:

SCI's operating cash flow for the full year 2024 was robust at $977 million.

Potential Liquidity Concerns or Strengths: The ability of SCI to generate significant cash from operating activities is a notable strength. In the third quarter of 2024, net cash provided by operating activities grew by 16% to $263.8 million compared to $227.8 million in the same quarter of the previous year.

For the full year 2024, SCI reported GAAP operating cash flow of $945 million. The company's adjusted operating cash flow for the same period was $977 million, which was above the high end of their expectations.

Despite these strengths, it's important to consider the company's debt levels. At the end of September 2024, SCI had $4.69 billion of debt. However, the company's stable rating outlook reflects its leading market position and expectation that its leverage will remain in a manageable range.

Net cash provided by operating activities increased to $263.8 million in the third quarter of 2024, up from $227.8 million in the third quarter of 2023. This increase was supported by favorable changes in preneed working capital, which offset higher cash interest payments and lower operating income.

In summary, Service Corporation International demonstrates strong cash flow from operations, which supports its liquidity. However, investors should monitor debt levels and working capital management to ensure continued financial health.

Service Corporation International (SCI) Valuation Analysis

Assessing whether Service Corporation International (SCI) is overvalued or undervalued requires examining several key financial metrics and market indicators. These include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield and payout ratios (if applicable), and analyst consensus on stock valuation.

Currently, the P/E ratio, a vital metric for assessing valuation, is influenced by SCI's earnings per share and stock price. For instance, SCI's most recent price-to-earnings (P/E) ratio stands at 22.81, compared to the industry median P/E ratio of 20.66. This suggests that the company may be slightly overvalued compared to its peers, as investors are paying more for each dollar of earnings.

The EV/EBITDA ratio offers insights into whether a company is undervalued or overvalued by comparing its Enterprise Value to its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). As of December 31, 2024, SCI's most recent Enterprise Value to EBITDA ratio is 15.75.

Reviewing SCI’s stock price trends over the past year provides context on market sentiment and investor confidence. SCI’s stock has shown moderate volatility. Over the last twelve months, the stock has fluctuated between a low of $58.08 and a high of $78.98. As of April 18, 2025, the stock closed at $74.40. The stock has demonstrated steady growth, reflecting positive investor sentiment driven by consistent financial performance and strategic initiatives.

Dividend yield and payout ratios are significant for income-focused investors. SCI has consistently provided dividends, enhancing its appeal to investors seeking regular income. The annual dividend rate is $1.16 per share. The dividend yield, calculated by dividing the annual dividend by the stock price, is approximately 1.56%. The payout ratio, which indicates the proportion of earnings paid out as dividends, is around 35.8%, reflecting a sustainable dividend policy.

Analyst consensus is a crucial indicator of market sentiment and future stock performance. Based on recent ratings, analysts provide varied recommendations. As of April 2025:

• Buy Recommendations: Several analysts rate SCI as a 'Buy,' projecting continued growth and strong financial performance.
• Hold Recommendations: A portion of analysts recommend holding SCI, indicating a neutral outlook based on current valuation and market conditions.
• Sell Recommendations: A few analysts suggest selling SCI, reflecting concerns about potential headwinds or overvaluation.

Here's a summary of Service Corporation International's valuation metrics as of fiscal year 2024:

For more insights into the investors of SCI, check out: Exploring Service Corporation International (SCI) Investor Profile: Who’s Buying and Why?

Service Corporation International (SCI) Risk Factors

Service Corporation International (SCI), as a leading provider of deathcare products and services, faces a variety of internal and external risks that could significantly impact its financial health. These risks span industry competition, regulatory changes, market conditions, and internal operational challenges.

Key Risks Facing Service Corporation International (SCI):

• Industry Competition: The funeral and cemetery industry is highly competitive. If SCI fails to respond effectively to changing consumer preferences, its market share, revenue, and profitability could decrease.
• Regulatory Changes: Increasing healthcare and funeral service sector regulations pose significant compliance risks for SCI. Potential regulatory fines could range from $100,000 to $500,000 per violation, requiring continuous adaptation.
• Market Conditions:
  • Changes in the number of deaths are unpredictable and can vary from market to market. A decline in death rates could reduce cash flows and revenue.
  • The continuing upward trend in life expectancy and the increasing preference for cremations in North America could lead to lower revenue, operating profit, and cash flows.
  • Overall economic downturns could reduce potential earnings and cash flows, leading to future impairments to goodwill and intangible assets.
• Operational Risks:
  • SCI's Canadian business is exposed to operational, economic, and currency risks.
  • A failure of a key information technology system or process could disrupt and adversely affect business operations.
  • Risks associated with the supply chain could materially and adversely affect financial performance.
  • The company is exposed to risks from inflation, which could increase costs and reduce consumer discretionary income, impacting liquidity and financial results.
  • Significant weather events, natural disasters, and public health crises in key revenue-generating states like California, Texas, and Florida could disrupt operations and increase costs.
• Financial Risks:
  • SCI's level of indebtedness could adversely affect cash flows, limit the ability to raise additional capital, and hinder responses to economic changes. As of Q3 2023, SCI reported total long-term debt of $3.2 billion.
  • The potential need to replenish trust funds due to market declines could negatively affect earnings and cash flow.
  • The fair value of SCI’s cemetery trust fund is subject to fluctuations in the equity and bond markets, which could affect its liquidity. At the end of 2023, SCI's cemetery trust fund had a fair value of USD 1.93 billion.
  • Unfavorable results of litigation could have a material adverse impact on financial statements.
  • Cemetery burial practice claims and the application of unclaimed property laws to preneed funeral and cemetery backlog could have a material adverse impact on liquidity, cash flows, and financial results.
  • Changes in taxation or the interpretation of tax laws could materially affect the results of operations, financial condition, or cash flows.
• Strategic Risks:
  • SCI's ability to execute its strategic plan is influenced by factors beyond its control, such as economic conditions and demographic trends.
  • If the company fails to attract and retain qualified sales personnel and licensed funeral professionals, it could adversely affect its business and financial condition.
• Other Risks:
  • Unfavorable publicity could affect SCI's reputation and business.
  • The financial condition of third-party life insurance companies that fund preneed contracts may impact future revenue.
  • SCI uses a combination of insurance, self-insurance, and large deductibles, exposing it to unexpected costs that could negatively affect financial performance.
  • Any failure to maintain the security of information relating to customers, their loved ones, associates, and vendors could damage the company's reputation.

Mitigation Strategies and Plans:

SCI employs several strategies to mitigate these risks:

• Financial Discipline: Maintaining a leverage ratio within the target range of 3.5x to 4.0x, supported by stable earnings and free cash flow.
• Trust Management: The SCI trusts returned +12.3% in 2024. The trusts are 59% equities, 27% fixed income, 10% alternatives, and 4% money markets, managed by large financial institutions with the goal of outpacing inflation.
• Operational Efficiency: Implementing a utility usage reporting system in 2023 to monitor and manage energy consumption across almost 2,000 locations.
• Compliance and Ethics: Maintaining a comprehensive Code of Conduct and whistleblower policy to ensure ethical practices and compliance with laws and regulations. The estimated annual compliance cost is $45-55 million.
• Sustainability Initiatives: Focusing on responsible use of natural resources, water reduction pilots, and expanding green burial and eco-friendly funeral offerings.
• Community Engagement: Supporting causes that enhance the well-being of communities through strategic partnerships.
• Technology and Innovation: Investing in digital technologies to enhance customer experience and streamline operations.

SCI's success depends on managing these risks effectively while adapting to changing market dynamics and consumer preferences. The company's long-term growth strategy focuses on growing revenue, leveraging its scale, and investing capital wisely to enhance shareholder value.

Learn more about SCI's financial health: Breaking Down Service Corporation International (SCI) Financial Health: Key Insights for Investors

Service Corporation International (SCI) Growth Opportunities

Service Corporation International (SCI) demonstrates promising future growth prospects driven by strategic initiatives and market dynamics. An analysis of key growth drivers, future revenue growth projections, and strategic initiatives provides insights into the company's potential.

Key growth drivers for SCI include:

• Demographic Trends: The increasing aging population in North America is a significant driver, as the death rate is expected to rise, increasing the demand for funeral and cemetery services.
• Acquisition Strategy: SCI has a track record of acquiring smaller funeral homes and cemeteries, expanding its market presence and leveraging economies of scale.
• Preneed Sales: Growth in preneed funeral sales provides a future revenue stream and strengthens customer relationships.
• Product Innovation: Offering diverse and personalized memorialization options caters to changing consumer preferences.

While specific future revenue growth projections and earnings estimates for SCI beyond 2024 are not available in the provided context, analysts' estimates and company guidance often provide such information. For example, SCI expected earnings per share for 2024 to be between $3.70 and $4.10. These estimates usually factor in anticipated growth from the drivers mentioned above. Keep in mind that these figures are estimates and are subject to change based on various market conditions and company performance.

Strategic initiatives that may drive future growth include:

• Technology Adoption: Implementing technology to enhance customer experience and streamline operations.
• Geographic Expansion: Exploring opportunities to expand services in growing markets.
• Partnerships: Collaborating with related service providers, such as grief counseling or estate planning firms.

SCI possesses several competitive advantages that position the company for growth:

• Scale and Network: SCI operates a large network of funeral homes and cemeteries, providing economies of scale and brand recognition.
• Established Brand: The company has a long-standing reputation and a trusted brand in the death care industry.
• Diversified Services: SCI offers a range of services, including funeral arrangements, cremation, memorialization, and preneed planning, catering to diverse customer needs.
• Financial Strength: A solid financial position allows SCI to invest in growth initiatives and weather economic downturns.

For additional insights into the company's values, see Mission Statement, Vision, & Core Values of Service Corporation International (SCI).