SCI CEO On 2027 Costs: 'We Don't Like It Either' As Funeral Giant Plans Price Increases
Tom Ryan said SCI plans to pass inflation to customers and expects growth within its long-term range next year, after cutting its 2026 outlook.
Tom Ryan, chairman and CEO of Service Corp. International, said on the company's third-quarter earnings call that SCI will lean on pricing and tighter fixed costs in 2027 after healthcare, fuel and selling costs ran above plan. "We don't like it either," Ryan told a Raymond James analyst, adding: "We're going to do something about this."
A lower year, a $3.99 midpoint
SCI, which runs funeral homes and cemeteries under brands including Dignity Memorial, earned adjusted $0.97 a share in the third quarter, up from $0.87 a year earlier. Ryan said revenue and earnings still fell below internal expectations.
The company guided fourth-quarter earnings per share to $1.10 to $1.20. For the full year, the midpoint of normalized earnings per share is now about $3.99, against the $4.20 midpoint set in February.
Ryan pointed to funeral volumes running about 200 basis points below initial expectations, worth an estimated 18 to 20 cents of earnings headwind. Cemetery trust fund income added 12 cents, and a roughly 100 basis point slide in the cemetery revenue recognition rate offset stronger pre-need cemetery sales. Fixed-cost growth was 4.1% in the third quarter, versus 2.7% in the second.
Pricing, costs and the 2027 bridge
Ryan said the company is not prepared to give 2027 guidance but believes it will "definitely be in that guidance range," with comparable funeral volumes flat to slightly higher. He described a plan of passing along some costs and reducing others.
He put the selling-cost overage at about $2 million for the quarter, a little over a penny a share, and expects about the same in the fourth quarter, easing in the back half of 2027. He called the spending "growing pains" from the cemetery cremation memorialization rollout and more funeral seminars.
Asked by a UBS analyst about timing, Ryan said SCI prices in waves and will move first on items it sees as inflationary, while trying to manage costs so they are not passed on. On healthcare, he told a Truist analyst employees will see higher contributions: "that's just the way the world is right now."
October funeral volumes are down slightly, Ryan said, and SCI projects the fourth quarter slightly below a year earlier.
Cash flow holds at $750 million
President and CFO Eric Tanzberger confirmed adjusted operating cash flow guidance of $1.055 billion to $1.115 billion, which at the $1.085 billion midpoint leaves adjusted free cash flow of $750 million after $335 million of maintenance capital spending, up from $637 million last year. Third-quarter adjusted operating cash flow rose $29 million to $297 million.
SCI has returned over $460 million to shareholders this year and has about $480 million of buyback authorization left. Net debt to EBITDA stood at about 3.7 times, with liquidity near $1.7 billion.
SCI will report fourth-quarter results on its next earnings call, where the $1.10 to $1.20 range will be tested.
Sources
- Compared to Estimates, Service Corp. (SCI) Q3 Earnings: A Look at Key Metrics — Yahoo Finance
- Document — sec.gov
- Service Corp. (SCI) Q3 Earnings and Revenues Miss Estimates — Yahoo Finance
- Service Corp.: Q3 Earnings Snapshot – WTOP News — wtop.com
- Service Corporation Queues for Q3 Earnings: Key Things to Note — Yahoo Finance
