A recent opinion article from Seeking Alpha author Lighting Rock Research concludes that “After two years of deleveraging and portfolio optimization, I think this is a turning point for Carriage Services to pursue acquisitions and grow its core funeral and cemetery businesses.”

Here are a couple of bullet points from the article whereby the author thinks Carriage Services is on an upswing.

• “(Carriage Services is) reflecting stable growth and a turning point after two years of deleveraging.”
• “Carriage’s preneed cemetery strategy and normalized growth post-pandemic support steady cash flow and future profitability.”
• “Balance sheet improvements position the company for strategic M&A, with forecasts of 4% organic revenue growth and incremental margin expansion.”

One dissenting bullet point by the author is such:

• “Key Carriage Services risks include leadership transition, competition from low-cost providers, and the need to further reduce high-cost debt.”

Here are some more bullet points from the article, which you can access here:

• “Carriage Services operates 159 funeral homes and 28 cemeteries in the U.S. market, making it a small competitor to Service Corporation International (SCI). The company has recently focused on debt repayment and optimizing its overall portfolios.”.
• “Carriage Services has generated stable growth over the past years, with a 6% revenue growth and 7.1% adjusted EPS growth.”
• “The key message for the quarter was that the company’s business is back on track after two years of debt repayment and divesting non-core business units.”

Comparisons with SCI —-

The article by Lighting Rock Research was published shortly after Carriage Services 2nd Quarter financial reports.  Lightning Rock Research also published an article shortly after the 2nd Quarter financial report of Service Corporation International.  You can access Funeral Director Daily’s coverage of that article here.

What is interesting about those two articles by the same author is that you can make comparisons on two companies in the Death Care retail business and look for similarities and differences.  For whatever reason, Lightning Rock Research sees, as a percentage, future revenue growth higher with SCI than Carriage.  The Revenue Growth Rate projections as shown on the charts below indicate a slightly over 6% annual rate for SCI and a slightly under 6% annual rate for Carriage Services.

When it comes to Earnings Per Share, the researcher postulates in his projections that SCI will almost triple its profits in the next decade while maintaining that Carriage Services will slightly more than double their Earnings Per Share over the same time period.  At first thought that difference could be seen as SCI using their economies of scale to increase profits. . . . Or, it could be that the author believes that cemeteries will be more profitable than funeral homes over that time period as SCI operates the higher percentage of cemeteries of the two entities.

Here are some charts where you can find some comparative numbers between SCI and Carriage Services that were provided in the articles by Lighting Rock Research:

Current Numbers taken from 10-k report as reported by LIghting Rock Research.  (FCF=Free Cash Flow)

Carriage Services 10-Year Projections from Lighting Rock Research:

Carriage Services Ten-Year Forecast by Lighting Rock Research

Service Corporation International 10-Year Projections from Lighting Rock Research:

Projections of SCI’s Revenue, Operating Profits, Net Profits, and more through 2034 by Lighting Rock Research

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  I always caution myself that when I look at financial reports that the numbers are “one-point, stationary-in-time” numbers.  It is my opinion that to get a good feel on the direction of a company you need to look at “trends over time”.

However, these two fairly current articles by the same researcher give us some type of feel as to how that researcher sees the companies from his point of view.

One difference I have with the research is his opinion that his viewpoint that one risk with Carriage Services is “leadership transition”.  The  founding of the company and the 30-year leadership of Melvin Payne can not be diminished, however, I think that leadership team of the past two years is now in place and will be a strength of Carriage Services moving forward rather than a potential weakness.

Disclaimer — The author of this article for Funeral Director Daily is a shareholder of both Carriage Services and Service Corporation International.

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“A servant’s attitude guided by Christ leads to a significant life”

The title of this article poses what seems to be a simple question.  I don’t think it is.

We recently printed an article that brought attention to the fact that Batesville and Tukios “made a deal” that, at least from my point of view, allowed Batesville to concentrate on its “core” business of caskets, cremation products, and software solutions.  I think it is pretty easy, especially if you are my age, to have the perception that the “core” of Batesville is casket sales and, increasingly, cremation product sales. . . . and, I would argue that most businesses that look to Batesville for solutions, look in those two categories, at least until they get more familiar with the company.

However, when potential clients look to traditional funeral homes  — what is the “core” product or feature that makes them call the funeral home?  What are they looking for? . . . . And, is that item changing as time moves on?`

I think it does change and over time the “core” business of the person taking care of the dead in America has been fluid.  For instance, if you go back to the Old West days of the United States the “core” business of an undertaker was to build a wooden box for the casket, dig the grave, and transport the deceased in the box to the grave.  That’s what people expected when they contacted the “undertaker”.

Eventually, undertakers built facilities and at least part of the “core” business was to provide a “place” for the reception of guests for the grieving family to receive.  During that time, and for the better part of the entire 20th Century, the “core” business also included the funeral home guiding the family through the entire process which included embalming, sale of a casket, the visitation, funeral service, and graveside.  I think it was also hard to define your business “core” at this time on the perception of your clientele.   —  While your business was much more than “selling a casket”, many client families would say “they had to go to a funeral home, not to facilitate the funeral, but to buy a casket”.  In essence, they didn’t seem to peerceive or understand all that the funeral home did and supplied.

Eventually, in the latter part of the 20th Century cremation associations and cremation-only businesses started to come into existence.  I think at that time Death Care perception changed and an additional  “core” business in Death Care was born.  Those businesses developed a “core” that was perceived by the consumer as “Cremation”.  Many clients still needed and wanted additional services such as a memorial service but a certain, and growing niche of consumers, considered “Cremation” as the “core” of the business that they were contacting for Death Care services.

Moving into the current environment of Death Care we have niches that want the consumer to select them for their services by their “core” business.  Some of those are cremation businesses, natural organic reduction businesses, alkaline hydrolysis businesses, flameless cremation businesses, event centers for services, online urn and jewelry sales, niche products like Better Place Forests and Parting Stone, and on and on.

Tom Anderson
Funeral Director Daily

So, if you operate a traditional funeral home how do you position the “core” perception of your business so that potential clients think of you not only for traditional casketed funerals and cremation services, but all of the options that are now becoming available to the general public?

The way I look at it from a consumer perspective is that there are lots of issues surrounding the death of a loved one.  People move out of home communities more often today than ever before.  Maybe those people need advice on returning a loved one to a far-away community for burial.  People, as we mentioned above, also have disposition and memorialization options that they never had before.  Many people want to know the costs and possibly set aside money for future obligations more so than in the past.

I don’t know exactly how I would do so, but as I look at the ever-expanding Death Care choices that consumers now have, I would want to position my “core” business as a “Death Care Solutions Center”.  And, I think some of the funeral homes that are advocating for community Death Cafe discussion times are on the right track to doing that.

A “Death Care Solutions Center” could position a business to offer an “Optionality” to those that call on them.  As the public continues to realize and understand that there is more to Death Care than caskets and cremation this core competency should position a funeral home to be on the front end of helping consumers decide the specifics of their future Death Care plans.

In my way of thinking, positioning your business for success is all about how you get that potential client to look to you for your “trusted advice and competence” before they look somewhere else.  And, the proper perception of what you do in their mind will help them get to you.

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“A servant’s attitude guided by Christ leads to a significant life”