SCI reported on its third-quarter earnings last week, and while the top-line numbers show a solid year-over-year EPS jump to $0.97 (a healthy 11% bump from last year’s $0.87), the team at headquarters had to do some recalibrating for the remainder of 2026.
Management made much out of reduced volumes, which dipped by 0.5% for the quarter, keeping year-to-date numbers down about 3.1% (largely due to a sluggish start back in Q1).
“Based on our nationwide internal analysis, we believe we have maintained our market share throughout 2026,” said CEO Tom Ryan.
He suggested the dip is more about a lighter overall death rate, but the company also hasn’t been making the kinds of acquisitions that we (and probably they) expected earlier in the year.
Analyst Tyler Barishaw of Truist and A.J. Rice of UBS questioned why management isn’t leaning more aggressively into acquisitions given that year-to-date deal activity is tracking toward the lower end of their $75 million to $125 million target range.
Tanzberger said the company is taking a patient, disciplined approach. They choose to pass on deals that don’t fit their exact regional scale or return thresholds, directing surplus capital instead toward share repurchases, high-yielding developments, and robust liquidity ($1.7 billion total).
SCI actually has spent more on M&A this year than it had this time last year, but they’re not getting the kind of growth they were, which might account for the focus on stock buybacks and capital improvements. SCI took it on the chin a bit from Wall Street over the earnings, but it’s worth mentioning that they seem to be gearing up for a bigger (and possibly tighter) future. A serious part of that is continuing their preneed push.
Preneed Momentum: Sales Are Rolling, Recognition Is Waiting
If you look at preneed sales production, the engine is humming. Comparable preneed cemetery sales jumped 5% (up 7.5% year-to-date), and preneed funeral sales climbed 6%. The folks on the ground are converting by leaning into seminars and lunch-and-learn type events. They’ve mentioned these approaches in previous presentations, but the expense disconnect required addressing.
That is, SCI’s preneed success created an interesting operational quirk: a timing mismatch on revenue recognition. CFO Eric Tanzberger and Ryan explained that a bigger chunk of recent sales growth is coming from undeveloped property, merchandise, and services that sit in the backlog until the work is actually done.
Managing the Margin: Wage Shifts, Healthcare, and Fuel
On the expense side, fixed costs grew faster than anticipated, ticking up to about 4.1% in Q3 compared to 2.7% earlier in the year. A lot of that pressure came from items familiar to anyone managing a multi-location operation: rising healthcare costs, fuel spikes, and promotional spending around digital cremation memorialization gardens and community seminars.
“I think the selling costs were about, call it, a little over $0.01 above our expectations, call it about $2 million for the quarter,” said Ryan. “I’d expect that to probably be about the same in the fourth quarter. And then I think as we calendar this as you get into 2027, particularly in the back half, that those things should begin to trend down.”
He added that the company’s deliberate shift toward a guaranteed hourly wage structure for sales counselors, which was designed to boost retention, added some short-term pressure to selling compensation rates. These costs, though, were built in and part of SCI’s last call.
Strong Cash Flow and Looking to 2027
Despite the earnings guide adjustment for Q4, the cash flow story remains exceptionally robust. Adjusted operating cash flow hit a stellar $297 million for the quarter (up 11% year-over-year), and adjusted free cash flow is projected to hit $750 million for the year.
That kind of liquidity ($1.7 billion total) means SCI is continuing to play offense: buying back shares, investing in high-yielding cemetery developments and digital lead-generation funnels.
