Service Corporation International

What they do

SCI operates 1,495 funeral service locations and 505 cemeteries (as of June 30, 2026), selling funeral and cemetery merchandise and services both at need and on a preneed basis. Its brands include Dignity Memorial, National Cremation Society, and Neptune Society, among others. The company holds a $17.6 billion preneed sales backlog, which supports future revenue stability.

Revenue drivers

• Funeral services — Largest revenue segment, driven by the number of services performed and average revenue per service. In Q2 2026, comparable funeral sales average grew 3% despite a 1% decline in services.
• Cemetery operations — Revenue from cemetery property, merchandise, and services. Comparable cemetery revenue increased 5% in Q2 2026, with preneed property production up 7%.
• Preneed sales — Preneed contracts for funeral and cemetery products and services generate deferred revenue and build the backlog. Comparable preneed funeral sales production grew 7% in Q2 2026, and cemetery preneed sales production grew 8%.
• Trust fund earnings — Affiliated trust funds (for preneed and perpetual care) generate investment returns; combined trust return was 15.1% in 2025. These earnings boost recognized revenue and income.

Recent performance

In Q2 2026, revenue rose 4% to $1,103.3 million, with GAAP EPS of $0.90 (vs. $0.86 a year ago). Operating cash flow increased 43% to $238.7 million for the quarter, and $572.4 million for the first half of 2026. For FY2025, revenue was $4.31 billion and net income was $542.6 million, with diluted EPS of $3.80.

Strategy

Management prioritizes strategic acquisitions and new locations, targeting returns above its weighted average cost of capital. It also focuses on enhancing cremation offerings and customer-facing technology to drive higher average revenue. Excess cash is returned via dividends and share repurchases; in 2026 YTD, $363 million was returned. The company targets a leverage ratio of 3.5x–4.0x, with 5.0x maximum under its credit facility.

Risks

• Cremation mix shift — Cremation services generate lower average revenue than traditional burials; if the mix shifts faster than complementary sales grow, revenue per contract could decline.
• Trust fund market exposure — Affiliated trust funds hold equity and fixed income securities; market downturns could reduce investment earnings and the fair value of trust assets.
• Leverage and covenant compliance — As of June 30, 2026, the leverage ratio was 3.77x against a 5.00x maximum, but debt of $5.11 billion requires sustained cash flow to meet obligations and maintain compliance.
• Geographic concentration — Operations are spread across 44 states and Canada, but local demographic and economic conditions can impact death rates and demand for services.

Outlook

The company confirmed its 2026 EPS midpoint guidance and raised its 2026 cash flow guidance. Management expects continued growth in cemetery revenue and preneed production, though near-term cemetery gross margins may face pressure from deferred property sales. Funeral segment growth is anticipated to be driven by higher average revenue per service.