SCI Q3 2026 Earnings: Revenue Grows While Cemetery Margins Narrow

Service Corporation International (NYSE: SCI) reported Q3 2026 revenue of $1.107 billion, up 5% from $1.058 billion a year earlier, while diluted GAAP EPS rose 24% to $1.03 from $0.83. Adjusted EPS increased 11% to $0.97, and operating cash flow rose 18% to $296.8 million, although cemetery margins narrowed as higher selling, marketing, and healthcare costs absorbed much of the segment’s revenue growth.

Core Earnings Results

For the three months ended September 30, consolidated gross profit increased more slowly than revenue, reducing gross margin by approximately 50 basis points. Operating income grew faster because corporate general and administrative expense declined and SCI recorded an $11.2 million net gain from asset divestitures and impairment charges, compared with a $0.4 million net loss a year earlier.

The special-item benefit helps explain why GAAP EPS grew faster than adjusted EPS. A lower diluted share count—137.2 million versus 141.4 million—also supported per-share growth.

Adjusted EPS and adjusted operating cash flow are non-GAAP measures that exclude specified special items.

Business and Segment Performance

Funeral revenue increased as higher average revenue per service offset essentially flat comparable service volume. Comparable funeral revenue grew 3.3%, the average revenue per service rose 2.8% to $6,022, and comparable services performed declined 0.1%. Funeral preneed sales production increased 6.1% to $323.5 million.

Cemetery revenue also increased, but profit growth was limited by higher selling compensation, advertising, marketing, and health insurance expenses. Comparable cemetery revenue rose 4.0%, while comparable gross margin fell 110 basis points to 33.2%. Other cemetery revenue increased 19.7% to $45.5 million, primarily because of higher endowment care trust fund income and total return distributions.

Profitability, Cash Flow, and the Balance Sheet

Reported operating margin expanded despite lower consolidated gross margin. Corporate G&A expense declined to $30.6 million from $38.3 million, mainly because of lower long-term incentive compensation tied to total shareholder return and a favorable legal settlement. The net gain on non-strategic asset divestitures also lifted reported operating income.

Adjusted operating cash flow increased by $29.0 million. Higher operating income and a $29.9 million working-capital benefit—primarily related to the timing of an additional payroll cycle in the prior-year quarter—were partially offset by $15.8 million of additional cash taxes. Q3 capital expenditures were $99.5 million, compared with $101.6 million a year earlier.

At September 30, 2026, cash and cash equivalents stood at $172.7 million, down from $243.6 million at the end of 2025. During the first nine months of 2026, SCI generated $869.3 million of operating cash flow, spent $275.0 million on capital expenditures, and returned approximately $464 million through share repurchases and dividends. Long-term debt declined to $4.978 billion, while current debt maturities increased to $195.1 million from $56.8 million at year-end.

Preneed Growth Is Building Backlog but Pressuring Current Margins

Preneed activity remained an important growth driver, but the timing of revenue recognition and related selling costs constrained current profitability. Comparable funeral preneed sales production increased 6.1%, and comparable cemetery preneed sales production rose 4.8%.

Within the cemetery business, preneed property sales production grew 4.2%, while recognized preneed property revenue increased only 1.2%. The cemetery recognition rate consequently declined to 96.6% from 97.6%, indicating that more sales were being added to the backlog rather than recognized immediately as revenue.

At the same time, SCI incurred higher selling compensation and advertising expenses to generate those sales. Changes to the sales compensation structure, including higher guaranteed hourly wages, also caused more selling costs to be recognized in the current period. Management expects the accumulated deferred property, merchandise, and service revenue to support future results, but the near-term effect is lower cemetery margin.

Earnings Guidance

SCI updated its fourth-quarter and full-year adjusted EPS outlook to reflect lower funeral volumes than originally anticipated and the continuing effects of higher healthcare, selling compensation, advertising, and marketing expenses. The company nevertheless confirmed its full-year adjusted operating cash flow outlook.

The forward-looking adjusted measures are non-GAAP. SCI did not provide corresponding GAAP guidance because several potential adjusting items were not available on a forward-looking basis.

Recent Insider Transactions

The reported six-month summary showed 352,375 insider shares acquired across 11 transactions and 332,791 shares sold across three transactions, resulting in net purchases of 19,584 shares. Total insider holdings were listed at 4.12 million shares, with net purchases equal to 0.50% of that amount.

The latest reported activity included derivative exercises followed by sales from senior executives, along with four director stock awards. All transactions below were reported as direct ownership; exercises and awards are not equivalent to open-market purchases.

Risks Investors Should Monitor

• Lower funeral volume: Updated guidance reflects funeral volumes below SCI’s original expectations. Because funeral and cemetery operations have significant fixed costs, continued volume pressure could weigh on revenue and margins.
• Elevated operating expenses: Management expects higher healthcare, selling compensation, advertising, and marketing costs to continue into Q4, extending pressure on near-term earnings.
• Preneed recognition timing: Preneed sales are growing faster than some recognized revenue categories. This expands the backlog but delays the related revenue and profit contribution.
• Nonrecurring quarterly benefits: GAAP earnings included an $11.2 million net gain from divestitures and impairment charges, while cash flow benefited from favorable working-capital timing. These contributions may not recur at the same level.
• Trust fund sensitivity: Cemetery other revenue benefited from trust fund income and total return distributions, leaving part of segment performance exposed to financial-market conditions.

Summary

SCI’s Q3 2026 results combined higher revenue, double-digit EPS growth, and improved operating cash flow with continued margin pressure in the cemetery business. Higher average funeral revenue and expanding preneed sales supported growth, while healthcare, compensation, and marketing costs limited the immediate profit contribution. The main items to monitor are funeral volume, the duration of elevated costs, and how quickly the growing preneed backlog converts into recognized revenue and earnings.