A Bad Day for Death

Posted by: Ben Steverman on February 9, 2009

From the stock market to the political world, this past year has demonstrated the folly of plenty of old maxims. Still, credit crisis or not, there’s nothing more reliable than death.

So it was a little surprising to see today Service Corporation International (SCI) warn of falling profits. SCI is the biggest funeral and cemetery company in the world. It owns 1,300 funeral homes and 350 cemeteries.

Death may be inevitable, but the death business apparently hasn’t matched the reliability of other consumer staples like cereal (Kellogg) and shampoo (Procter & Gamble).

SCI lowered fourth quarter earnings guidance, blaming the decline on weaker pre-need cemetery sales and lower income from trust funds. The stock plunged 13% on Feb. 9 to a share price of 4.25, and all told shares are off 63% in the past 12 months.

A heavy debt load seems to be a problem for SCI. And, Raymond James (RJF) analyst John Ransom sees the firm’s recurring free cash flow plunging, from $252 million in 2007 to an estimated $184 million in 2009.

However, Ransom reiterated his “strong buy” rating on the stock, citing its “attractive valuation.”

Reader Comments

Ace Man

February 10, 2009 6:08 PM

This story is a no-brainer. SCI should file for chapter 11 and restructure its debt, or go private. Apart from that, up the fees for services. People will need a place to spend eternity. SCI is not GM; now that is a serious problem.

neetugarg37

February 13, 2009 6:28 AM

Yes it is true that SCI is lowered fourth quarter earnings guidance and blaming the decline on weaker pre-need cemetery sales.
so it is too bad for people.
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daisy
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Business Opportunities-Business Opportunities

John E Godiska

February 17, 2009 5:33 AM

Up the fees for services??
The original concept put out, was for streamlining te funeral industry to cut costs. Kind of like a Wall mart for Dead People.
What they did, was to try to buy existing funeral homes in areas. They raised prices instead of trying to lower them. Not nickle and dime stuff mind you. 20 to 30 % increases. In a matter of days.
Their CEO's were of the mind that " people have a lot of money and we are going to get it".Using the old " Wasn't your Father worth $20,000.00"?
We buried my mother in law at the family funeral home which they bought. The prices were exorbitant. They used all the standard lines . Their service consisted mainly of asking how we were going to pay for it. Asking about insurances, and bank accounts. Maybe they were right somewhat. Some of the family didn't question it. I knew what was going on, as I had been involved in other areas of the death care industry.It took everything I had not to crack the guy in the face and take out a few of his teeth.
On the evening of the viewing, their personel actually turned down the AC, to make it cold so people would leave. I saw the guy do it. I saw them looking around and looking at their watches.I saw them talking and motioning to the AC control. So excuse me if I do not have any animosity for SCI. It goes far beyone that.
My own personal opinion is that SCI has done a good job of burying themselves.The sooner they throw the last shovel of dirt over them, the better.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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