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

You need a clear-eyed view of Service Corporation International's (SCI) financial health, especially as the market digests the shift from post-COVID volume surges to a more normalized environment. The core takeaway is that while funeral volumes are expected to be flat to slightly down for 2025, the company's disciplined capital strategy is still driving significant shareholder value, translating near-term stability into long-term cash flow. Wall Street analysts have a consensus "Buy" rating, projecting an average price target of $92.00, but that doesn't tell the whole story. Management has narrowed its normalized earnings per share (EPS) guidance to $3.80 to $3.90 for the fiscal year, and more importantly, they've raised the adjusted operating cash flow outlook to a substantial range of $880 million to $940 million; that's defintely a strong signal of operational efficiency. We're seeing a strategic pivot, too: a slight dip in pre-need funeral sales production as the SCI Direct segment transitions to an insurance-funded model, but that headwind is being offset by robust cemetery pre-need sales, where large sales (over $80,000) were up 10% in the third quarter alone. That's how a company with a trailing twelve-month revenue of $4.29 Billion USD manages to keep its growth engine humming.

Revenue Analysis

You're looking at Service Corporation International (SCI), the largest deathcare provider in North America, and the first thing to understand is that their revenue model is built on two distinct, yet complementary, pillars: the 'atneed' business and the critical 'preneed' sales. The trailing twelve months (TTM) revenue as of the third quarter of 2025 stands at approximately $4.29 billion, representing a solid year-over-year growth of 3.41%. That growth is defintely not explosive, but in a mature, non-cyclical industry like this, steady, predictable growth is exactly what you want.

Here's the quick math on where that revenue comes from. Service Corporation International operates two primary segments: Funeral and Cemetery. The Funeral segment is the larger contributor, but the Cemetery segment, fueled by preneed sales, is the engine of high-margin growth right now. The company's overall revenue growth is being driven by higher average revenue per service and robust preneed sales production, which is a key indicator for future performance.

The Funeral segment, which includes core services and merchandise, saw its comparable revenue grow by 3.9% in the first quarter of 2025, reaching $625.9 million for that period. That growth was a 'double-barrel' effect, coming from both an increase in the number of services performed (up 1.8%) and a higher average revenue per service (up 2.3%, to $5,743 per service). However, the third quarter saw a slight dip in core funeral services, a trend that bears watching, but the increase in average revenue per funeral is compensating for that volume loss.

The real story of change is in the Cemetery segment. While the first quarter saw a slight revenue dip, the third quarter of 2025 saw comparable cemetery revenue surge by 7%, driven largely by a 9.6% increase in preneed sales production. This preneed business (selling services and property before they are needed) is crucial because it locks in future revenue and cash flow. The company's SCI Direct division, which focuses on pre-arranged funeral and cemetery sales, contributes about $200 million to the total annual revenue, highlighting the strategic importance of this long-term sales channel. This shift toward preneed is a deliberate strategy to adapt to the stabilizing, but still high, cremation rate, by offering new cemetery options to cremation consumers. You can dig deeper into the ownership structure and market sentiment here: Exploring Service Corporation International (SCI) Investor Profile: Who's Buying and Why?

The significant change in revenue streams is the increasing reliance on preneed sales, particularly in the Cemetery segment. It's a shift from being purely dependent on immediate, atneed services. This is a higher-margin, more predictable revenue source. The key drivers are:

• Cemetery preneed sales production growth: up 9.6% in Q3 2025.
• Higher average revenue per funeral service: up 3.1% in Q3 2025.
• Growth in general agency revenue, benefiting from a change in the preferred preneed insurance provider.

What this estimate hides is the lag between a preneed sale and revenue recognition (when the service is delivered or property constructed), but the strong production numbers today mean a healthier revenue stream tomorrow. The company is successfully navigating the post-COVID volume fluctuations by focusing on pricing power and the long-term value of preneed contracts.

Profitability Metrics

You're looking for a clear read on Service Corporation International's (SCI) ability to turn revenue into profit, and the $\mathbf{2025}$ numbers show a business that is not only resilient but also highly efficient. The direct takeaway is that SCI maintains a premium profitability profile against its industry, driven by strong operational leverage in its cemetery segment.

Based on the midpoint of the $\mathbf{2025}$ guidance, we project the company's full-year adjusted net profit margin to be approximately $\mathbf{13.1\%}$. Here's the quick math: using the Trailing Twelve Months (TTM) revenue of approximately $\mathbf{\$4.29}$ billion and the midpoint of the adjusted earnings per share (EPS) guidance of $\mathbf{\$3.85}$, we estimate a net income of around $\mathbf{\$562.1}$ million. That's a solid margin.

Gross, Operating, and Net Profit Margins

When you break down the margins, you see the clear separation between the two core businesses. The first quarter of $\mathbf{2025}$ saw the total operating income margin improve to $\mathbf{23.4\%}$ from $\mathbf{22.2\%}$ in the prior year, a direct result of effective cost management. This is a high-margin business, plain and simple.

The segment-level gross profit margins for the third quarter of $\mathbf{2025}$ tell the real story of operational efficiency and where the profit is generated. The cemetery business is the defintely the powerhouse:

• Cemetery Gross Profit Margin: $\mathbf{34\%}$
• Funeral Gross Profit Margin: Approximately $\mathbf{18\%}$

The funeral segment's lower margin is typical for service-heavy operations, but the cemetery segment's $\mathbf{34\%}$ gross margin-which grew $\mathbf{160}$ basis points in Q3 $\mathbf{2025}$-is exceptional. This high margin reflects the long-term, preneed (pre-planned) sales model and the inherent leverage in real estate and service bundling.

Profitability Trends and Industry Comparison

The trend is clear: SCI is successfully managing the industry-wide shift toward cremation, which is generally a lower-margin service, by focusing on cost control and high-value cemetery sales. While the broader funeral industry sees net profit margins typically ranging from $\mathbf{10\%}$ to $\mathbf{20\%}$ for successful homes, SCI's estimated full-year adjusted net profit margin of $\mathbf{13.1\%}$ sits comfortably in the middle-to-high end of that range, despite its massive scale.

What this estimate hides is the power of their scale. Smaller, single-location funeral homes often land in the $\mathbf{10\%}$ to $\mathbf{15\%}$ range due to higher per-service fixed costs. SCI's ability to hit $\mathbf{13.1\%}$ at a multi-billion dollar revenue level proves their superior operational efficiency (economies of scale). You can dive deeper into the investor base that supports this model by Exploring Service Corporation International (SCI) Investor Profile: Who's Buying and Why?

Analysis of Operational Efficiency

Operational efficiency is the key to maintaining these margins. Management has repeatedly cited 'effective cost management' as a driver of solid gross profit performance and margin expansion in $\mathbf{2025}$.

The company's strategy is visible in the segment performance:

The trade-off is evident: the high-margin cemetery business is insulating the company from the cost pressures and slight revenue challenges seen in the funeral segment. This operational structure is a major competitive advantage (a wide economic moat), giving them a cushion against inflation and shifting consumer preferences.

Next step: Check the capital expenditure plan against the adjusted operating cash flow guidance of $\mathbf{\$910}$ million to $\mathbf{\$950}$ million to confirm the free cash flow generation for $\mathbf{2026}$ acquisitions.

Debt vs. Equity Structure

You're looking at Service Corporation International (SCI) and asking the right question: how is this company financing its growth? The direct takeaway is that SCI operates with a significantly debt-heavy capital structure, which is a calculated strategy in this stable, capital-intensive industry, but it also means higher financial risk than its peers.

As of September 2025, SCI's balance sheet showed substantial debt. The company carried approximately $4,962 million in long-term debt and capital lease obligations, plus another $67 million in short-term debt, totaling nearly $5.03 billion in debt. This is a heavy load, but it's important to remember that the deathcare industry generates predictable, annuity-like cash flows, which supports this level of borrowing.

Here's the quick math on the leverage picture:

• Total Debt (Sep 2025): $5.03 billion
• Total Stockholders' Equity (Sep 2025): $1.567 billion

The company's debt-to-equity (D/E) ratio stood at a high 3.21 as of September 2025. What this estimate hides is the industry context: the median D/E ratio for the Personal Services industry, where SCI operates, is closer to 0.71. A D/E ratio of 3.21 means SCI is using over three dollars of debt for every one dollar of equity to fund its assets. That's aggressive financing, defintely. Compared to the industry median, SCI is highly leveraged, ranking worse than over 87% of its peers.

The balance between debt financing and equity funding at Service Corporation International leans heavily toward debt, a common trait for companies in the funeral and cemetery space that use debt for acquisitions and to fund their significant pre-need trust funds (which are long-term liabilities). The company's publicly stated net leverage target range is 3.5x to 4.0x, which is a high but managed level. This high leverage allows them to boost their Return on Equity (ROE) but also exposes them to higher interest rate risk.

In terms of recent activity, SCI is actively managing this debt. Just this month, on November 20, 2025, the company entered a new senior unsecured credit agreement. This deal provides a new $750 million senior term loan and a $1.75 billion revolving credit facility, both set to mature in November 2030. This refinancing move, totaling $2.5 billion, is a clear action to optimize their capital structure and secure liquidity for future operations and acquisitions. S&P Global Ratings maintains a 'BB+' issuer credit rating on SCI with a stable outlook, reflecting their leading market position despite the narrow focus.

Here is a snapshot of the key financial leverage metrics for Service Corporation International:

If you want to dig deeper into the company's full financial picture, including its pre-need trust fund liabilities, you can read the full post here: Breaking Down Service Corporation International (SCI) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Service Corporation International (SCI) has the cash to cover its near-term bills, and the answer is nuanced. On paper, the liquidity ratios look weak, but the company's business model and significant available credit tell a different story. You can't just look at the raw numbers here; you need to understand the preneed trust structure.

Here's the quick math on their immediate liquidity position, based on the latest available 2025 data:

• The Current Ratio (Current Assets / Current Liabilities) for the Trailing Twelve Months (TTM) ending November 2025 is approximately 0.56.
• The Quick Ratio (a more conservative measure, excluding inventory) for the quarter ending September 2025 is 0.52.

A ratio below 1.0 means that, technically, Service Corporation International (SCI)'s current assets do not cover its current liabilities. But honestly, for this industry, that's not defintely a red flag. SCI collects significant cash upfront for preneed funeral and cemetery services, which is then legally held in trusts and classified as a non-current liability. This structure makes the traditional current and quick ratios look artificially low.

The real strength is in the company's access to capital, which is what matters for a large, stable business like this. Total liquidity at the end of the third quarter of 2025 was nearly $1.5 billion, which included $240 million of cash on hand and a substantial $1.2 billion available on their bank credit facility.

Working Capital and Cash Flow Trends

The core of SCI's financial health is its ability to generate strong cash flow. Management is confident, having recently raised its full-year 2025 cash flow guidance to a range of $910 million to $950 million. This increase is directly tied to 'stronger working capital trends' and anticipated lower cash taxes.

The company's working capital position, as measured by Net Current Asset Value, remains negative at approximately $-16.37 billion for the TTM ending November 2025, which again reflects the large preneed trust liabilities on the balance sheet. What you should focus on is the cash flow generation, which is excellent.

We can break down the cash flow statement for the third quarter of 2025:

Operating cash flow is robust, and the company is using that cash to invest in its business (investing cash flow) and return capital to shareholders (financing cash flow) through share repurchases ($400 million year-to-date) and dividends ($135 million year-to-date). That's a sign of a mature, cash-rich business.

For a deeper dive into the company's valuation models, you can check out the full post: Breaking Down Service Corporation International (SCI) Financial Health: Key Insights for Investors.

Liquidity Strengths, Not Concerns

The low current and quick ratios are a structural feature, not a liquidity crisis. The company's core strength is its predictable, high-margin operating cash flow, which is now expected to be between $910 million and $950 million for the full 2025 fiscal year. Plus, the $1.2 billion in available credit provides a massive buffer. The risk is minimal unless a catastrophic, sustained drop in death rates occurs, which is not a near-term concern. Your key takeaway: the cash is there, just not all sitting in the current assets bucket.

Valuation Analysis

You're looking at Service Corporation International (SCI) and asking the core question: is the stock priced fairly, or is there a genuine opportunity here? Based on the latest data from November 2025, the market is pricing SCI as a quality, stable business, but analysts still see a clear path for upside, suggesting it's currently undervalued by a meaningful margin.

The valuation multiples tell a story of a premium-priced stock compared to the broader market, but not necessarily compared to its own history or the stable nature of its business. For example, the trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio stands at approximately 21.47x as of mid-November 2025. That's a higher multiple than the average US Consumer Services industry P/E of around 15.8x, suggesting the market is willing to pay more for SCI's predictable, recession-resistant cash flows.

Here's the quick math on key valuation metrics:

• Price-to-Earnings (P/E) TTM: 21.47x
• Price-to-Book (P/B): 6.76
• Enterprise Value-to-EBITDA (EV/EBITDA) TTM: 12.17x

The high Price-to-Book (P/B) ratio of 6.76 shows the significant value of its intangible assets-like its massive network of funeral homes and cemeteries-which aren't fully captured on the balance sheet. This is common for a business with a strong, defensible market position. The EV/EBITDA of 12.17x is also slightly elevated, but it's still within a reasonable range for a market leader with a Mission Statement, Vision, & Core Values of Service Corporation International (SCI). focused on long-term growth and acquisitions.

To be fair, the stock has been under pressure. Over the last 12 months leading up to November 2025, Service Corporation International's market capitalization has decreased by 10.35%. The stock price has traded in a 52-week range between a low of $71.75 and a high of $89.37. This pullback, however, is what creates the current opportunity.

Wall Street analysts are overwhelmingly bullish, with a consensus rating of Buy as of November 2025. The average 12-month price target is $92.00, representing a potential upside of over 15% from the recent trading price of approximately $79.64. This suggests the dip is viewed as temporary, not structural.

From a shareholder return perspective, Service Corporation International offers a sustainable dividend. The current dividend yield is approximately 1.71%, with an annual payout of around $1.36 per share. Crucially, the dividend payout ratio is a healthy 36.66% of trailing year earnings, meaning they have plenty of room to cover the dividend and continue their 15-year streak of dividend increases. They defintely have the cash flow to keep growing both the business and the payout.

Risk Factors

You're looking at Service Corporation International (SCI)'s numbers, and while the 2025 adjusted earnings per share (EPS) guidance is solid-narrowed to $3.80 to $3.90-a seasoned investor knows to look past the headline. The deathcare industry, despite its essential nature, faces distinct near-term operational and long-term strategic headwinds. This isn't a set-it-and-forget-it stock; you need to map the risks to their financial impact.

Here's the quick math: SCI has an improved 2025 adjusted operating cash flow guidance of $880 million to $940 million, which is great, but that cash flow is constantly challenged by internal cost pressures and external market shifts. The main risks fall into three buckets: operational friction, persistent industry trends, and financial pressures.

• Operational friction is slowing down preneed sales.
• Industry trends are forcing a fundamental business model change.
• Financial pressures are eating into margins.

Operational and Strategic Headwinds

The most immediate risk is a self-inflicted one within the pre-need sales (pre-arranged funeral services) segment. Management cited a temporary reduction in non-funeral home preneed sales production because of a strategic transition to insurance-funded contracts at SCI Direct. This operational shift caused non-funeral home preneed sales revenue to decrease by $4.6 million in one quarter, and the full recovery isn't expected until early 2026. That's a definite drag on near-term growth, even as comparable preneed cemetery sales production increased by 9.6% in the third quarter of 2025.

Another operational challenge is inflation hitting the cemetery segment. Rising water and labor costs are putting pressure on cemetery maintenance. The company is actively mitigating this by implementing new staffing metrics and technological initiatives, but it's a constant battle against macroeconomic pressures. Plus, you can't ignore the long-term strategic risk: the continuing upward trend in life expectancy and the rising North American cremation rate could result in lower revenue and operating profit for traditional, higher-margin services.

Financial and External Risks

On the financial front, the company is facing an expected increase in cash taxes paid. For instance, in the third quarter of 2025, net cash provided by operating activities was $252.3 million, which was affected by an expected increase in cash taxes paid of $11.1 million compared to the prior year. This higher tax rate is expected to continue through the fourth quarter, partially offsetting the benefit from the company's aggressive share repurchase program, which saw $400 million in repurchases year-to-date 2025.

The industry itself remains highly competitive, and as a high fixed-cost business, any decline in funeral volumes-which are projected to be 'slightly below flat' for 2025-can disproportionately hurt profitability. Also, while not unique to SCI, the risk of a failure in a key information technology system or process could be catastrophic, especially given the scale of their operations.

Here is a snapshot of the key financial risks and the company's stated actions:

To get a full picture of the company's performance and valuation, including a deeper dive into their Discounted Cash Flow (DCF) analysis, you should review the full post at Breaking Down Service Corporation International (SCI) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking for where Service Corporation International (SCI) will find its next wave of growth, and the answer is a blend of demographic inevitability, strategic consolidation, and smart digital adaptation. The core takeaway is that SCI is positioned to deliver on its long-term earnings per share (EPS) growth framework of 8% to 12%, with the 2025 guidance midpoint sitting squarely within that range.

The company has narrowed its 2025 normalized EPS guidance to a tight range of $3.80 to $3.90, reflecting confidence in its operational levers. This growth isn't a fluke; it's driven by two primary engines: the cemetery segment's powerful preneed sales and a disciplined acquisition strategy that continues to consolidate a fragmented industry. They are a trend-aware realist, just like us.

Growth Drivers and Revenue Projections

The most immediate and powerful driver is the cemetery segment, specifically preneed sales (selling services and property before they are needed). In the third quarter of 2025, comparable cemetery preneed sales production jumped by a robust 9.6%. This is a high-margin business, and the backlog of unfulfilled preneed contracts stood at a massive $16.0 billion at the end of 2024, which translates to highly predictable future revenue.

On the funeral side, while volumes are expected to be flat to slightly down in 2025, the average revenue per service is growing at inflationary rates, which helps maintain profitability. The company is also raising its cash flow outlook for 2025, now projecting adjusted operating cash flow between $910 million and $950 million, a clear sign of strong working capital management and lower anticipated cash taxes.

Strategic Initiatives and Competitive Edge

SCI's strategy is built on three pillars: consolidation, product innovation, and digital leverage. They maintain a disciplined acquisition strategy, spending an impressive $181 million in 2024 to acquire 26 funeral homes and 6 cemeteries in major metro markets. They also pursue greenfield expansions-building new facilities-with over $100 million in total growth capital spent in 2024.

Product-wise, they are adapting to the rising cremation rate by focusing on innovative cremation solutions and transitioning their preneed contracts from trust-funded to insurance-backed products, a move that enhances their financial flexibility. They also have a partnership with Global Atlantic to enhance service offerings. Honestly, their scale is their biggest competitive advantage (SCI is North America's largest provider), operating 1,493 funeral service locations and 496 cemeteries as of late 2024. That's a huge moat.

Their strategic initiatives include:

• Accelerating market share toward a 25% to 30% target.
• Investing in digital transformation for up-selling services.
• Shifting preneed sales to insurance-funded contracts for better liquidity.
• Maintaining a robust acquisition pipeline, targeting $75-$125 million in annual spend.

To be fair, the continued rise in cremation rates and regulatory shifts, like those seen in California and Florida affecting SCI Direct, are real headwinds. Still, the company's ability to use its massive scale and brand recognition-Dignity Memorial-to navigate these changes and still project strong EPS defintely gives them an edge. You can see more about what drives their long-term vision here: Mission Statement, Vision, & Core Values of Service Corporation International (SCI).