SCI Cuts 2026 Earnings Outlook As Fixed Costs Climb 4.1% And Funeral Volumes Fall Short
The funeral chain now sees full-year normalized earnings of about $3.99 a share at the midpoint, down from $4.20 set in February.
Service Corp. International, the funeral and cemetery operator behind Dignity Memorial, lowered its 2026 earnings outlook on its third-quarter earnings call, with Chairman and CEO Tom Ryan putting the full-year normalized earnings midpoint at about $3.99 a share, against the original $4.20 midpoint from February. Fourth-quarter guidance is $1.10 to $1.20 a share.
Volumes, costs and timing
Ryan said full-year funeral volumes are now projected about 200 basis points (two percentage points) below initial expectations, an estimated 18 to 20 cents a share headwind. Stronger cemetery trust fund income, worth 12 cents a share, offset a meaningful part of it.
Pre-need cemetery sales production is expected to grow 6% to 7% this year, ahead of the original 4% to 5%, which he estimated adds roughly 8 to 10 cents a share. A roughly 100 basis point drop in the cemetery revenue recognition rate has largely offset that gain, because more sales are in merchandise, services and undeveloped property whose revenue is deferred while the related selling pay is largely fixed and booked immediately. Ryan called that a timing issue.
The company also saw about 100 basis points of added fixed-cost growth, driven by higher healthcare and other costs.
Why the fourth quarter took the hit
Pressed by a Bank of America analyst on why the fourth quarter absorbed so much, Ryan said fixed costs grew 2.7% in the second quarter and 4.1% in the third. Much of the "sneak up in the costs" came in the third quarter, he said, from items like healthcare and fuel, plus committed selling costs, and those trends should continue.
On volumes, Ryan said the second half was expected to rebound. Third-quarter volumes missed, which he said cost about three cents a share. He projected another four or five cents of negative versus expectations in the fourth quarter. October volumes are "down slightly versus being up," he said, and the company now expects the fourth quarter to be down slightly from a year earlier.
Third-quarter adjusted earnings were $0.97 a share, up from $0.87 a year earlier, though revenue and earnings fell short of internal expectations. Comparable core funeral volume fell 0.5% in the quarter and 3.1% year to date.
Pricing and what holds up
SCI, which ran 1,485 funeral locations and 500 cemeteries as of December 31, 2025, plans to price in waves over the coming months and early 2027 to offset fuel and other inflation, Ryan said. Promotional costs ran about $2 million over expectations in the third quarter and should be similar in the fourth, with a trend down as 2027 progresses, "particularly in the back half," he said.
Cash flow guidance held. Chief Financial Officer Eric Tanzberger confirmed adjusted operating cash flow of $1.055 billion to $1.115 billion, implying adjusted free cash flow of about $750 million against $637 million last year. Year to date, SCI has returned over $460 million to shareholders and has about $480 million of buyback authorization left. Ryan said the pre-need backlog stands at $18 billion.
SCI shares fell 11.45% to $72.90 in Thursday trading, from a prior close of $82.33.
Ryan declined to give 2027 guidance but said he expects comparable funeral volumes to be flat to slightly higher and that SCI will "definitely be in that guidance range."
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
