Carriage delivered a third-quarter performance defined by a sharp contrast between a solid operational recovery in its core funeral division and ongoing sales friction within its cemetery business. While improved contract volumes, stronger pricing, and an accelerating acquisition pipeline highlight underlying growth across the operating footprint, soft preneed property sales in key markets and a discrete trust-related tax expense forced executive leadership to trim their full-year 2026 financial outlook.
Soft Preneed Cemetery Sales Drive Q3 Drag
Preneed property sales were a primary driver of the quarter’s headwinds in the cemetery division, which faced noticeable downward pressure across several markets, but particularly, it concentrated heavily within Carriage’s California properties.
“As we look at year to date, we look at California being down 7.1% on preneed cemetery property, where everywhere else is up 10.1%,” said Chief Executive Officer Carlos Quezada. “Once you look into the different brackets of pricing within California, it’s pretty clear that the contracts between below 10,000, but really below 20,000, are the ones driving the most deficit on the preneed cemetery growth, whereas contracts between 20,000 and 30,000 is up by 13.7%. We are addressing these challenges.”
He referred to the lower-valued contracts as bread-and-butter-type transactions that were missed. To fix the localized shortfall, he said, Carriage will refocus on recruiting experienced sales personnel, driving targeted lead generation, revamping sales training programs, and realigning property inventory. Although sales production has recovered more slowly than executives initially targeted, Quezada expressed firm confidence in the trajectory of the turnaround.
“We haven’t seen the lift as fast as I would have hoped,” Quezada said, “but I do believe as we continue to execute on the program … we should be able to get back on track by the end of the fourth quarter.”
Management targets a complete operational recovery in the first quarter of 2027.
Funeral Division Rebounds on Market Share Gains
In stark contrast to cemetery preneed sales, the core funeral segment demonstrated encouraging operational resilience throughout the quarter. Comparable funeral revenue grew 3.6 percent in the third quarter, fueled by a 2.3 percent increase in same-store contract volume, a 2.5 percent rise in total contracts, and a $109 increase in average revenue per contract.
This positive volume growth outpaced broader death-care industry trends. When addressing whether external death rates drove the higher volume, Quezada credited market share gains rather than broader demographic trends.
“If I compare it to the available information that I have, I’m going to use SCI as an example for the third quarter],” Quezada explained. “Core funeral home for them was down by 50 basis points, whereas our volume, total funeral volume comparable was up 2.3%. To say that’s a function of death rate? It would be complicated.”
Funeral operating margins compressed slightly to 35.9 percent from 36.9 percent in the prior-year period. Chief Financial Officer John Enwright attributed this margin shift primarily to labor costs, noting that “the salary and benefit line, ultimately was the main driver of kind of the point erosion.”
Financial revenue for the quarter finished at $6.2 million, heavily weighed down by a discrete tax obligation of approximately $2.5 million. The company incurred this tax expense when investment managers sold certain Master Limited Partnership holdings sitting inside corporate trust accounts. Executive leadership confirmed that this discrete tax drag remained entirely isolated to the third quarter and will not impact fourth-quarter financial performance or ongoing trust distribution yields.
Acquisition Pipeline Accelerates as Divestitures End
External expansion remains a major bright spot for Carriage as the company ramps up its acquisition program. Carriage currently holds over $14 million in annualized revenue under contract or letter of intent across five separate transactions. President and Chief Operating Officer Steve Metzger praised the strength of the deal pipeline and the quality of prospective partners.
“This is my ninth year at Carriage, and we’ve never been anywhere close to the number of quality conversations we’re having right now with businesses that align with our growth strategy,” Metzger said.
Spanning five states, these target acquisitions include high-quality combination funeral home and cemetery operations, standalone funeral homes, and crematories. Metzger added that “the majority of deals we’re looking at right now are home sourced … and so they’re not competitive deals.” When competitive auction processes do arise, Metzger noted that “sometimes, depending on the participants, it gets a little too rich for our blood and we tap out. We’ve seen that happen again this year, and primarily from some of the private equity-backed players who have entered.”
The company expects to close these acquisitions across the fourth quarter of 2026 and the first quarter of 2027 as state regulators complete their reviews.
Carriage will fund these strategic acquisitions through a combination of fourth-quarter free cash flow generation and tapping its newly expanded $300 million credit facility, which increased borrowing capacity commitment by $50 million. Enwright confirmed that management expects year-end net leverage to land “between 4 and 4.1,” a figure that fully incorporates the debt required to close all five pending transactions. This is a bellwether number Carriage targeted as part of its turnaround.
Metzger also confirmed that Carriage has officially finished its historical property divestiture program.
“We’ve pretty much wrapped up our divestiture focus,” Metzger said. “We haven’t sold any additional businesses this year and don’t have any plans to sell any in the future.”
Operational Frameworks and Full-Year 2026 Outlook
Beyond external dealmaking, Carriage is actively updating its internal organizational framework. The company launched “The Carriage Way,” an enterprise culture program designed to sharpen operational accountability across all business units while preserving the local brand identity of acquired properties.
On the technology front, leadership brought in external consultants alongside new IT leadership to evaluate the ongoing rollout of its Trinityenterprise software pilot. Enwright noted that the team will “share a lot more at the end of the fourth quarter.”
Taking into account early-year mortality softness, localized cemetery sales performance, and acquisition closing timelines, Carriage updated its full-year 2026 financial guidance. Management now projects total revenue between $415 million and $420 million, with adjusted consolidated EBITDA expected between $125 million and $130 million. The company forecasts adjusted diluted earnings per share at $2.90 to $3.05, while adjusted free cash flow should reach $40 million to $45 million. Capital expenditures remain unchanged at $20 million to $25 million as Carriage maintains its capital allocation balance between growth and debt management.
