3 Factors That Make Service Corporation a Lucrative Pick Now

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Service Corporation International SCI deserves a look as this provider of deathcare products and services has seen its shares rally 12.5% in the past six months, outpacing the industry 's growth of 8.8%. The company has been gaining on various strategic growth efforts and solid funeral service revenues, which also aided its performance in second-quarter 2018.

Let's delve deeper into the factors that are likely to continue driving this Zacks Rank #2 (Buy) company.

Robust Strategic Growth Efforts & Demographic Trends

Service Corporation is focused on strategic growth efforts, which are mainly aimed at boosting revenues, utilizing scale and deploying capital, efficiently. The company concentrates on catering to the changing consumer needs and utilizing its robust scale to drive preneed sales at both its segments. In fact, Service Corporation is also making technological advancements to better present its products and services to consumers. These factors along with the demographic landscape remain tailwinds to the company's revenues. Markedly, Service Corporation remains well positioned to continue gaining from the aging Baby Boomer population, which is fueling the company's preneed cemetery sales programs and is expected to boost its preneed and atneed funeral results further.

Acquisitions a Major Driver

Service Corporation, which shares space with StoneMor Partners STON , remains committed toward pursuing strategic buyouts for both its segments and building new funeral homes to generate greater returns. Also, buyouts in the cemetery segment are aimed at exploiting increased opportunities to cater to Baby Boomers. The company has a solid record of making and integrating prudent businesses.  Some notable acquisitions made by the company include Alderwoods Group (2006), Keystone North America (2010), The Neptune Society (2011) and Stewart Enterprises (2013).

Solid Funeral Service Revenues

The company's comparable funeral service revenues have been growing year over year for three straight quarters, with an increase in comparable funeral preneed sales production. In the second quarter of 2018, comparable funeral sales rose 1.5% on the back of higher general agency revenues and increased recognized preneed revenues. The latter was a result of higher non-funeral home sales production. Further, comparable preneed funeral sales production grew 11.2%, driven by strength in core and non-funeral home channels. This, in turn, was fueled by newly introduced sales technology and new marketing campaigns.

Backed by such upsides, Service Corporation put up a strong show in the second quarter, wherein both the top and the bottom lines improved year over year and came ahead of the Zacks Consensus Estimate. The solid earnings and cash flow growth also enabled the company to take prudent capital initiatives and augment shareholders' returns. Incidentally, Service Corporation returned $141 million to shareholders via dividends and share buybacks, during the second quarter.

That said, we expect Service Corporation to continue with its impressive performance and remain in investors' good books.

Check These Solid Consumer Staples Picks

Hillenbrand, Inc. HI carries a Zacks Rank #2 and has delivered an average positive earnings surprise of 6.3% in the trailing four quarters.

Matthews International Corporation MATW , which has delivered an average positive earnings surprise of 3.5% in the trailing four quarters also carries a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: SCI , HI , MATW , STON

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