Service International’s second quarter saw performance in line with market expectations, as management highlighted growth in funeral revenue and gross profit as key contributors. CEO Thomas Ryan credited a healthy increase in average revenue per funeral service, up 3.3%, and improved cost control, noting that fixed costs grew below inflation. The company’s transition to a new preneed insurance provider temporarily reduced preneed funeral sales production but was largely anticipated. Ryan explained, “The favorable impact from the core average growth was partially offset by a 1.5% decrease in core funeral services performed.” Meanwhile, large cemetery sales also delivered strong results, although recognized preneed cemetery revenue was affected by lower recognition rates on new construction.
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Service International (SCI) Q2 CY2025 Highlights:
- Revenue: $1.07 billion vs analyst estimates of $1.05 billion (3% year-on-year growth, 1.3% beat)
- Adjusted EPS: $0.88 vs analyst estimates of $0.85 (3.6% beat)
- Adjusted EBITDA: $309.5 million vs analyst estimates of $309.3 million (29% margin, in line)
- Management reiterated its full-year Adjusted EPS guidance of $3.85 at the midpoint
- Operating Margin: 21.1%, in line with the same quarter last year
- Funeral Services Performed: 87,014, up 983 year on year
- Market Capitalization: $11.33 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Service International’s Q2 Earnings Call
- Albert J. William Rice (UBS) asked whether the dip in cemetery revenue recognition rates was normal volatility or something unusual. CFO Eric Tanzberger clarified this is typical seasonality, expecting recognition rates to rise in the second half as projects complete.
- Albert J. William Rice (UBS) inquired about the moderating cremation rate and its effect on revenue headwinds. CEO Thomas Ryan explained that slower increases in the cremation rate should reduce the annual revenue headwind, allowing for stronger average revenue per service.
- Parker Snure (Raymond James) asked about the seasonality of funeral volumes and tougher third-quarter comparisons. Ryan confirmed the third quarter will be a challenging comparison for funeral services but expects strong cemetery revenues.
- Tobey O'Brien Sommer (Truist) questioned the ongoing financial benefit from the new life insurance partner for preneed sales. Ryan noted improvements will depend on the mix of multi-pay versus single-pay insurance products and the effectiveness of sales presentations.
- Joanna Sylvia Gajuk (Bank of America) asked about capital deployment in light of higher cash flows. Tanzberger stated the capital allocation strategy remains unchanged, focusing on share repurchases, M&A, and new builds, with confidence in meeting acquisition investment targets.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace of recovery in preneed funeral sales production as the insurance transition concludes, (2) the sustainability of strong large cemetery sales and recognition rates as deferred revenue is realized, and (3) the ongoing impact of federal tax changes on cash flow and capital deployment. Execution in M&A and new build projects, as well as effective cost management, will also be key indicators of future performance.
Service International currently trades at $80.78, up from $75.59 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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