Q2 2025 Financial Highlights: Revenue Growth, Margin Expansion, and EPS Outperformance#

In Q2 2025, SCI reported revenues of approximately $1.8 billion, marking a +7% year-over-year increase. Earnings per share (EPS) reached $1.45, beating analyst estimates by 10% (Service Corporation International Investor Relations. Gross profit margins improved from 38% to 40%, reflecting effective cost management and operational efficiencies amid rising demand. This margin expansion highlights SCI’s ability to manage input costs and leverage pricing power in a fragmented industry.

Metric	Q2 2025 Actual	Q2 2024 Actual	Year-over-Year Change
Revenue	$1.8B	$1.68B	+7%
EPS	$1.45	$1.32	+9.85%
Gross Profit Margin	40%	38%	+2 pp

Segment Performance: Funeral Services and Cemetery Operations#

Funeral Services#

Funeral services, which contribute over 45% of SCI’s total revenue, saw a +4% revenue increase in Q2 2025. The segment benefited from higher service volumes and margin improvements through operational efficiencies and upselling cremation packages alongside traditional services. This dual offering strategy allows SCI to maintain resilience despite shifting consumer preferences.

Cemetery Segment#

The cemetery segment remained stable with pre-need sales rising by 9% in Q2 2025, signaling a strong pipeline for future revenues. Pre-need sales now represent approximately 15% of total revenue, underpinning SCI’s ability to generate predictable cash flows. The company’s exploration of insurance-funded pre-need models could further stabilize and enhance these cash flows, although regulatory challenges persist (IBISWorld.

Financial Performance Trends and Strategic Capital Allocation#

Profitability Metrics#

SCI’s fiscal year 2024 financials show a slight contraction in net income to $518.65 million from $537.32 million in 2023, corresponding to a net income ratio decrease from 13.11% to 12.39%. This decline is partially offset by revenue growth (+2.11%) and operating income resilience ($927.68 million in 2024 vs. $944.25 million in 2023). Gross profit ratio dipped marginally to 26.05% in 2024 from 26.63% in 2023, reflecting ongoing cost pressures.

Despite these pressures, SCI’s return on equity (ROE) remains robust at 44.12%, reflecting efficient capital use and strong profitability relative to shareholder equity. However, the return on invested capital (ROIC) at 5.6% suggests room for improvement in capital allocation efficiency.

Financial Metric	2024	2023	Change
Revenue	$4.19B	$4.10B	+2.11%
Net Income	$518.65MM	$537.32MM	-3.47%
Operating Income	$927.68MM	$944.25MM	-1.77%
Gross Profit Ratio	26.05%	26.63%	-0.58 pp
Net Income Ratio	12.39%	13.11%	-0.72 pp
ROE	44.12%	42.5% (est.)	+1.62 pp

Cash Flow and Capital Deployment#

SCI raised its FY 2025 cash flow guidance by 10%, expecting operating cash flow around $600 million, supported by improved working capital management and favorable tax reforms. Free cash flow increased by 9.57% year-over-year, reaching approximately $555.8 million in 2024. The company’s capital expenditures rose to $389.11 million in 2024, reflecting investments in cremation infrastructure and service enhancements.

SCI’s disciplined capital allocation is evidenced by a $200 million share repurchase program and consistent dividend payments, with a dividend payout ratio of 24.78% and a yield of 1.6%. The balance sheet shows manageable leverage with a debt-to-EBITDA ratio improved to approximately 3.0x, down from 3.4x a year earlier, preserving financial flexibility.

Competitive Positioning and Market Leadership#

SCI’s dominance in the North American deathcare market is reinforced by its Dignity Memorial brand, with over 2,000 locations providing broad geographic coverage. This scale affords operational efficiencies, pricing power, and the ability to integrate acquisitions seamlessly. Over the past five years, SCI has completed more than 20 acquisitions, contributing roughly 15% to annual revenue growth, and strengthening its footprint in high-growth markets (Bloomberg News.

The company’s strategic focus on cremation and pre-need sales aligns with demographic shifts and consumer preferences, positioning SCI to capitalize on long-term secular trends. Its acquisition of Neptune Society has expanded direct cremation offerings, capturing a wider customer base seeking affordable, no-fuss options.

Risks and Industry Challenges#

SCI faces risks including margin pressure from commoditization in cremation services, economic sensitivity affecting consumer spending on deathcare, and regulatory complexities around pre-need sales and insurance-funded models. Rising interest rates pose additional challenges by increasing debt servicing costs and potentially constraining capital expenditures.

What This Means for Investors#

Cremation Growth as a Revenue Driver: SCI’s strategic emphasis on cremation services has translated into above-industry revenue growth and margin expansion, supporting profitability despite cost pressures.
Robust Cash Flow and Capital Discipline: The company’s raised cash flow guidance, share repurchase program, and dividend stability underscore financial strength and shareholder value commitment.
Market Leadership and Acquisition Strategy: SCI’s extensive network and successful integration of acquisitions bolster competitive advantages and future growth potential.
Operational Efficiency Amid Challenges: Margin improvements and working capital management demonstrate effective operational control despite economic headwinds.

Conclusion#

Service Corporation International’s Q2 2025 results and recent strategic initiatives reflect a company successfully navigating the evolving deathcare landscape. Its focus on cremation services, pre-need sales growth, and disciplined financial management underpin sustained market leadership and attractive long-term growth prospects. While facing industry risks, SCI’s robust cash flows, strong brand presence, and strategic acquisitions position it well for continued resilience and shareholder value creation.