Service Corp International (SCI) delivered a positive surprise to investors on Thursday, reporting better-than-expected adjusted earnings per share (EPS) for the third quarter. The company achieved an adjusted EPS of $0.79, surpassing analysts’ consensus estimate of $0.77. This strong performance signals positive momentum for the company, although it was accompanied by a cautious outlook for the fourth quarter.
While the company’s revenue for the quarter reached $1.014 billion, it slightly missed analyst expectations of $1.016 billion. Despite this minor miss, SCI’s management remains optimistic about the company’s trajectory. Tom Ryan, Chairman and CEO of SCI, highlighted the positive impact of the company’s new marketing agreement with its preferred preneed insurance provider, which was launched during the quarter. The agreement has contributed to increased funeral revenue. Additionally, the company maintained a stable gross profit margin in both its funeral and cemetery operations, reflecting its focus on cost management.
However, SCI’s optimism was tempered by its forecast for the fourth quarter. The company anticipates an adjusted loss of $1.00 to $1.10 per share, a significant departure from analysts’ expectation of $0.77 per share. This forecast indicates that the company anticipates a challenging fourth quarter, potentially driven by seasonality and economic factors.
Despite the Q4 loss prediction, investors responded positively to the overall third-quarter results. SCI shares climbed 0.2% to close at $81.79 on Friday. Several analysts have adjusted their price targets for SCI following the earnings announcement. Raymond James analyst John Ransom maintained his Outperform rating for the stock and increased the price target from $80 to $85. Truist Securities analyst Tobey Sommer also retained his Buy rating but boosted the price target from $84 to $92. This positive sentiment from analysts reflects their confidence in SCI’s long-term prospects despite the short-term challenges.
The mixed performance in Q3 and the anticipated Q4 loss demonstrate that SCI is navigating a complex business environment. While the company has delivered solid results, it’s facing headwinds that will likely impact its profitability in the coming months. Investors will be closely watching SCI’s performance in the fourth quarter to assess its ability to navigate these challenges and maintain its long-term growth trajectory.
