Key Takeaways
- Service Corporation International shares fell 13% after it guided fourth-quarter adjusted EPS to $1.10-$1.20, below the $1.33 analysts expected.
- It cut its full-year outlook to $3.94-$4.04 from $4.10-$4.30, citing softer funeral volumes, higher healthcare costs and heavier preneed sales spending.
- Third-quarter adjusted EPS still grew 11%, and SCI held its full-year cash flow guidance.
- Carriage Services’ Nov. 4 report will show whether lighter funeral volumes are an industry problem.
Service Corporation International (SCI) shares are down 13% today after a soft forecast overshadowed a decent quarter.
After Wednesday’s close, the company guided fourth-quarter adjusted EPS to $1.10-$1.20. That midpoint is about 14% below the $1.33 analysts expected. SCI also cut its full-year outlook to $3.94-$4.04 from the $4.10-$4.30 it gave in July, when it confirmed the $4.20 midpoint. The new midpoint is $0.21 lower.
The Quarter Itself Held Up
Third-quarter revenue grew 5% to $1.11 billion, and adjusted EPS rose 11% to $0.97. Preneed sales production (funerals and cemetery property paid for ahead of time) rose 6% at comparable funeral homes and 5% at comparable cemeteries.
CEO Tom Ryan pointed to “stable funeral service volumes,” and comparable funeral services performed slipped just 0.1% from a year ago. Volumes have steadied, but SCI said its outlook now reflects “lower funeral volumes than we originally anticipated,” plus higher healthcare costs and more spent on sales pay and advertising.
That pulls 2026 below the path analysts had laid out:
The new $3.99 midpoint still tops 2025’s $3.85, but it’s well short of the $4.19 analysts had for 2026.
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SCI Is Spending Now for Later
Ryan said “our investments in preneed sales production will drive revenue and earnings growth as sales are recognized in the future.”
Some of it is timing. Preneed sales become revenue only when the service happens, but selling costs hit now. SCI raised guaranteed hourly wages for its salespeople, so more selling costs are being expensed now instead of deferred, which it says will lower that expense in later periods. Along with heavier advertising and higher health insurance costs, that cut comparable cemetery gross margin to 33.2% from 34.3%.
Operating margin was lower year over year in the first two quarters of 2026, though it recovered in the third:
And the fourth quarter is usually SCI’s best, at about 25% the last two years, so a cost squeeze there stings.
The cash side looks better. SCI held its full-year adjusted operating cash flow guidance at a $1.09 billion midpoint, for about $750 million of adjusted free cash flow. The same preneed push that costs earnings today is bringing in cash now.
Carriage Will Show if It’s the Whole Industry
Carriage Services (CSV) saw the same thing earlier in the year. Its comparable funeral contracts fell about 3.5% in the second quarter, which CEO Carlos Quezada blamed on “lower national mortality trends that emerged earlier this year.” It reports on Nov. 4. If its volumes are still down, SCI’s shortfall is the market, not the company.
The Price on Service Corp. Just Got Better
SCI traded at 19x forward earnings at Wednesday’s close, below its five-year average of 20x:
Today’s drop takes it to about 16x on estimates that haven’t been cut yet. Once analysts trim 2026 to match the new guide, it’s closer to 17x, still nearer the five-year low of 15x than the average.
Funeral volumes are the one input SCI can’t spend its way into, and if they stay light, the preneed payoff takes longer. But this resets near-term expectations at a business whose cash flow outlook didn’t budge, and patient investors get a better price for it. The fourth-quarter report early next year will show whether volumes hold and whether the higher selling costs start to pay back.
So What Is Service Corporation International Stock Actually Worth?
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