NEW YORK — Death and taxes, the saying goes, are the only certainties in life. If so, funeral companies like Houston’s Service Corporation International might look like a sure bet to investors.
The slow-growing but inevitable business is supported by the aging U.S. population: By 2030, the share of population older than 65 will climb to 21%, up from 15% in 2020, according to the Census Bureau.
Service Corporation International and rival Carriage Services have both seen their revenue rise over the past decade. Industry consolidation has helped bolster their pricing power at a time when privately-owned and family-run businesses still dominate. Profit margins have remained relatively steady despite the squeeze from inflation.
The National Funeral Directors Association is forecasting that overall industry revenue will grow at an annualized rate of 1.2%, reaching $20.2 billion in 2029.
Funeral expenses jumped 5.1% in 2023, according to inflation data from the consumer price index. That follows a 3.3% jump in 2022. Even with inflation easing, the factors that drove those big jumps, such as demographic shifts are likely to keep pushing expenses higher. Price increases for services and materials are not likely to reverse.
The median cost of a funeral with burial hit $8,300 in 2023, up from $7,848 in 2021, according to the National Funeral Directors Association. The median cost of a funeral with a cremation cost $6,280 in 2023, up from $5,810 in 2021.
Consumers are massively opting for the cheaper choice for their last earthly purchase: The cremation rate reached 60.5% in 2023, compared with a burial rate of 34.5%, according to the National Funeral Directors Association.
Service Corporation International is by far the bigger publicly-traded funeral company, with 1,490 funeral homes and 492 cemeteries nationwide. Carriage Services, also based in Houston and doing business nationwide, has 164 funeral homes and 31 cemeteries.
Carriage Services is considering more price increases through 2024.
“We can’t suddenly just go 10% increase across the board, so it’s been slowly but surely because we want to balance the price increase with volume,” said Carlos Quezada, CEO of Carriage Services, in a conference call with analysts following its latest earnings results. “We don’t want to lose volume and lose our ability to compete.”
Carriage Services’ second-quarter earnings and revenue jumped and beat Wall Street forecasts, while its net profit margin remained relatively steady at just under 6%. The stock is up 30% for the year, far outpacing the broader S&P 500 index.
Service Corporation International reported a slight downturn in second-quarter profit that missed analysts’ forecasts, though the company is still expected to report earnings growth overall for the year. It expects prepaid funeral services to help drive growth, along with acquisitions. Its stock is up 14% for the year, closer to the gains for the broader market.
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