Service Corporation International (SCI) reported fourth quarter 2025 adjusted earnings per share of $1.14, an 8% increase from the prior year, with full-year EPS reaching $3.85, up 9%. Revenue growth was moderate, with comparable funeral revenue increasing less than 1% driven by a 3.2% rise in average revenue per service, offset by a 1.9% decline in volume. The cemetery segment saw comparable revenue rise approximately 1%, with gross profit growing 3% and margins expanding 70 basis points to over 36%. The company generated $966 million in adjusted operating cash flow for the full year. Looking ahead to 2026, SCI provided normalized EPS guidance of $4.05 to $4.35, representing 5% to 13% growth (9% at the midpoint), driven by expectations for low-to-mid-single-digit preneed sales growth and continued margin expansion, despite anticipating funeral volumes to be flat to slightly down.
| Metric | Value | Change |
|---|---|---|
| Q4 Adjusted EPS | $1.14 | +8% |
| FY 2025 Adjusted EPS | $3.85 | +9% |
| Q4 Funeral Revenue Growth | <1% | Moderate Increase |
| Q4 Core Average Revenue Per Service | N/A | +3.2% |
| Q4 Funeral Volume | N/A | -1.9% |
| Q4 Cemetery Gross Profit | N/A | +3% |
| FY 2025 Adjusted Operating Cash Flow | $966 million | +11% |
| FY 2025 Share Repurchases | $461 million | N/A |
| 2026 EPS Guidance | $4.05 - $4.35 | +5% to +13% |
Management emphasized the successful stabilization of the insurance partner transition, noting that the general agency commission rate has 'stabilized now in the mid-30s percentage range.' This is a critical signal as it removes a major overhang on profitability; the prior volatility in commissions and cancellations was a drag, and stabilization allows for more predictable earnings and margin expansion in the funeral segment.
A significant strategic shift involves the move to a higher fixed compensation model for sales counselors. Management stated this was an 'operational decision' to improve retention and 'people power.' This shift reduces deferred compensation costs (impacting short-term margins) but is expected to drive better lead generation and conversion rates, evidenced by the 'tremendous out-of-the-gate results' in sales activity mentioned for the start of 2026.
SCI is actively targeting the cremation customer to drive cemetery sales, a demographic historically less likely to purchase cemetery property. Management detailed a pilot program involving 'videos into our locations' to show opportunities to cremation families. With 65% of services being cremations, successfully penetrating this segment represents a substantial long-term growth vector for their high-margin cemetery business.
The company is leveraging its strong balance sheet and liquidity ($1.7 billion) for aggressive capital deployment. In 2025, they returned $645 million to shareholders and plan to continue 'consistent and disciplined' buybacks. Furthermore, their M&A strategy is focused on 'larger independent type transactions' in markets where they already have scale, allowing them to rapidly integrate these assets and realize synergies, effectively deploying capital at 'low to mid-teen after-tax internal rates of return.'
Management highlighted a concerning trend regarding the normalization of mortality rates, specifically the decline in 'excess deaths' such as drug overdoses, suicides, and traffic fatalities. While positive for society, this creates a difficult comparison for SCI, contributing to a 1.9% decline in Q4 funeral volume and a 2026 outlook of 'flat to slightly down' volume. This structural shift in death rates poses a risk to top-line growth that management cannot control.
The shift to insurance-funded products in the SCI Direct channel is creating margin headwinds. Management explained that this transition 'compels the immediate recognition of the general agency commission and the related selling costs,' effectively replacing high-margin merchandise revenue with lower-margin commissions. This puts 'downward pressure on SCI Direct's margins' as they lap prior periods, potentially dampening profitability growth in the near term.
While the insurance transition is stabilizing, management noted 'higher cancellations resulting from the impact of our insurance partner transition.' They also mentioned a need to 'catch up' on accruals related to these cancellations (approximately 200 bps impact). This indicates some friction in the new sales process and suggests that the 'mid-30s' commission rate might face pressure if cancellation behaviors do not normalize as expected.
Corporate G&A expenses are expected to rise to $40-$42 million per quarter in 2026, up from the $34 million reported in Q4 (which benefited from a prior year legal reserve reduction). This step-up in overhead, driven partially by LTIP accruals and compensation costs, could act as a drag on net margin expansion if revenue growth remains modest.
Overall: Management displayed a tone of disciplined confidence regarding operational execution and strategic initiatives, while acknowledging external headwinds regarding mortality volumes. They were particularly enthusiastic about sales momentum and the stabilization of their insurance partner transition, yet remained realistic and 'paranoid' about volume trends.
Confidence: HIGH - Management expressed strong conviction in their ability to drive profit growth through pricing, cost control, and sales force effectiveness. They provided specific guidance ranges and detailed operational metrics, suggesting a high degree of visibility into their business model, even as they noted the unpredictability of large sales and mortality rates.
$4.05 to $4.35
Flat to slightly down
2% to 5%
$1.0 billion to $1.06 billion
~$325 million
$75 million to $125 million
Hedging & Uncertainty: Management employed hedging language primarily around volume predictions and large sales, using phrases like 'tough to predict,' 'could be a little bit volatile to the upside,' and 'flat to slightly down.' They used 'expect' frequently regarding financial metrics but softened outlooks with 'we believe' and 'anticipate.' For example, regarding the cremation initiative, they stated it is 'early days' and will 'take a while to roll it out,' managing expectations for immediate returns. This hedging reveals a cautious approach to external factors like mortality rates while maintaining confidence in internal operational levers.
"We're paranoid. We're going to fight for volume for market share." - Thomas Ryan, Chairman and CEO
"We're seeing tremendous out-of-the-gate results, both on funeral and cemetery, particularly cemetery." - Thomas Ryan, Chairman and CEO
"We believe the general agency commission rate to be stabilized now in the mid-30s percentage range moving forward." - Thomas Ryan, Chairman and CEO
"We're laser-focused on growing your great company as best we can for the long term." - Thomas Ryan, Chairman and CEO
"It's going to take a while to roll it out to the entire network, but we're in the beginnings of doing that now." - Thomas Ryan, Chairman and CEO
Analyst Sentiment: Analysts were inquisitive, probing for details on the sustainability of the recent sales momentum, the specific drivers of the improved cemetery velocity, and the mechanics behind the commission rate normalization. There was a focus on understanding the 'new normal' for mortality rates post-pandemic.
Management Responses: Management responses were detailed and transparent, often providing granular explanations of operational changes (e.g., the shift to fixed compensation). They readily admitted to 'paranoia' regarding volume but countered with strong data on sales execution and cost management.
Discussion on the drivers of cemetery preneed sales growth, specifically the balance between large property sales and core sales.
Detailed breakdown of the general agency commission rate decline and the impact of the new 'flex' product and cancellation rates.
Analysis of the 'excess deaths' phenomenon and its normalization, impacting funeral volume forecasts.
Inquiry into the perpetual care trust revenue increase and the accounting treatment of investment gains.
SCI remains a compelling long-term holding due to its resilient business model and disciplined capital allocation. Despite the near-term headwind of normalizing mortality rates (declining 'excess deaths'), the company is successfully driving profitability through pricing power (+3.2% ARPS) and strict cost control (managing G&A and fixed costs below inflation). The stabilization of the insurance partner transition removes a major overhang, and the strategic shift to fixed sales compensation is already yielding 'tremendous' sales momentum in early 2026. With a robust 9% EPS growth target for 2026, strong cash flow generation ($1B+ expected), and an aggressive share buyback program, SCI is well-positioned to deliver shareholder value even in a flat volume environment. The valuation is supported by the company's predictable cash flows and high barriers to entry in the cemetery space.
Management noted a decline in societal 'excess deaths' (drug overdoses, suicides, traffic fatalities) compared to the pandemic era. While positive for society, this creates a tough comparison for funeral volumes, contributing to the 'flat to slightly down' outlook.
Management remains bullish on long-term demographics, citing the 'aging of society' as a driver that will eventually offset current volume softness. They believe volumes will return to growth in 2027-2029.
Management is successfully managing costs to stay 'slightly below inflationary levels,' using supply chain optimization and labor efficiency tools to mitigate the impact of inflation on margins.