Let’s look at the industry’s performance and current valuation. Since the end of May 2020, the industry’s consensus earnings estimate for the current year has jumped almost 22%. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident about this group’s earnings growth potential. The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates robust near-term prospects. The industry currently carries a Zacks Industry Rank #25, which places it in the top 10% of more than 250 Zacks industries. The Zacks Funeral Services industry is housed within the broader Zacks Consumer Staples sector. Zacks Industry Rank Indicates Strong Prospects Evidently, consumers are choosing shrouds and woodland burials over coffins and graveyards, while tech advancement is increasing the popularity of video tributes. Threat from Cheaper Alternatives: Availability of funeral-related products on the e-commerce platform and use of environment-friendly alternatives for burials are quite a threat to industry participants. In fact, we note that the pandemic has fueled this trend, with families choosing cremations over the elaborate traditional funerals. Cremation costs significantly lower than traditional funeral, with the average cremation service cost being roughly $2,500. Increased Cremation Rates Hurt Revenue Per Client: Rising demand for cremation over traditional funerals has hurt revenue per client in the funeral services space. Also, companies are focused on strengthening base through expansion and acquisition of funeral homes as well as development of cemetery property to generate greater revenues. In this regard, the entire funeral process that involves embalming as well as use of caskets, urns, vehicles, funeral staff and equipment among others acts as a significant revenue source for industry participants. Thus, industry players are likely to benefit from high mortality rates and an aging baby boomer population. Steady Demand: While the funeral services industry is unpleasant by nature, the inevitability of death keeps demand for its services intact in general. This again poses threat to revenues of traditional funeral service players. Also, social distancing has led to increased online funerals – including live streaming of the services performed. Also, lower social in-person interaction at funerals is a threat to pre-need revenues. However, social distancing-related limits on the gathering size at funerals are weighing on revenue per service performed. The constant increase in the number of COVID-19 cases has spiked up demand for funeral homes, crematories and morgues. Impact of COVID-19: Increased deaths due to the coronavirus pandemic have raised demand for products and services of companies in the funeral services space. Incidentally, services booked in advance fall under the pre-need category, while services booked due to a sudden demise comes under the at-need category.Ĥ Trends Shaping the Future of the Funeral Services Industry Further, these companies possess funeral homes, cemeteries, funeral service/cemetery combination locations and crematoria. Firms in this space sell cemetery property as well as related products and merchandise including caskets cemetery interment rights burial vaults garments and stone and bronze memorials. The Zacks Funeral Services industry comprises companies that offer deathcare products and services in the United States. ( HI), Matthews International Corporation ( MATW) and Carriage Services, Inc. To this end, high mortality rates, an aging baby boomer population and efforts to strengthen business through expansion and acquisition bode well for players like Service Corporation International ( SCI), Hillenbrand, Inc. Nonetheless, with death being inevitable, steady demand for funeral services keeps the industry going. Also, consumers’ rising preference for cremation over traditional burials poses threats to revenue per client. However, the pandemic-led social distancing has limited funeral size and scope, thereby hurting revenue per service performed. With no effective treatment in sight, increased deaths from the virus is likely to keep fuelling demand for products and services of the industry’s players. Players in the Zacks Funeral Services industry are seeing increased demand owing to the spreading of the coronavirus pandemic that has claimed thousands of lives.
0 Comments
Leave a Reply. |