The death industry is a tale of two economies. A relatively few large companies, most of them publicly traded, control most of the businesses that sells caskets and granite for memorials. The rest of the death industry is made up of many modest businesses. Most of the 19,500 funeral homes in the country are small operations, often owned by the same families for generations. There are more than 120,000 cemeteries and many of these belong to families, nonprofits, and religious institutions.

Death has become more democratic, particularly over time and especially in America. Centuries ago Egyptian pharaohs received elaborate funerals and entombments which would cost  many millions of dollars by today’s standards. The typical Egyptian was fortunate to have a modest burial. Centuries later, bishops were sealed in crypts carved with their likenesses. Their congregations were filled mostly with people whose final resting places were unmarked, and who were buried without coffins and certainly without  rings or mitres.

Today, nearly all of the deceased receive some sort of burial or cremation even if it is paid for by the state. The cost of land and the current overcrowding in cemeteries, along with changes in perception, have made people consider cremation.  Cremations are less expensive than the cost of caskets and plots. John Ross, the executive director of the Cremations Association of North America, claims that a crematory fee is $1,400 which includes a modest urn. Bob Fells, acting CEO of the International Cemetery  and Cremation Funeral Association says that 36% of Americans who die now are cremated. That number is expected to rise to 56% by 2025, although it is hard to imagine how anyone could forecast a trend of that sort so precisely. Most of the funeral business will be decimated if the cremation trend does continue.

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Death, like so many other businesses, has been changed by the internet. Wal-Mart sells caskets online at a discount, sometimes as much as two-thirds of  their retail prices. They are shipped to funeral homes.  This competition is another factor that will erode the margins of the traditional funeral industry.

24/7 Wall St. analyzed  the death industry. Much of it is dominated by a few large companies. The tens of thousands of smaller firms that compete with these public corporations have been affected profoundly by their business practices and pricing. The firms that have started to change the industry through e-commerce will certainly leave a larger and larger mark on the sector as each year passes, transforming the American way of dealing with its dead.

Here is the 24/7 Wall St. Ten Companies That Control The Death Industry:

Hillenbrand, Inc. (HI)
> Interesting Fact: Sells 45% of caskets sold in the United States
> # of Employees: 3,200
> Most Recent Quarter Revenue: $212 Million
> Most Recent Net Income: $20 Million

Hillenbrand sells more than 800,000 of the 1.8 million caskets sold in the United States each year. In addition to this, the company sells cremation containers and urns. All of Hillenbrand’s funeral products are sold under their Batesville Casket Company brand, which was founded in 1906.

Service Corp. International (SCI)
> Interesting Fact: funeral and cemetery market share in North America of roughly 12%
> # of Employees: 13,087
> Most Recent Quarter Revenue: $533.2 Million
> Most Recent Net Income: $18.8 Million

Service Corp. International owns more funeral homes, cemeteries, and crematories than any other company in North America. At last count, the company operates 1,254 funeral service locations and 372 cemeteries in 43 states, Canada, Puerto Rico, and Germany.  SCI also sells a variety of merchandise including caskets, vaults, and urns.

Walmart (WMT)
> Interesting Fact: Caskets come with monthly payment terms
> # of Employees: 2,100,000
> Most Recent Quarter Revenue: $101.9 billion
> Most Recent Net Income: $3.6 billion

Walmart, the world’s largest retailer, helped begin the trend of selling low-priced caskets online. The company offers the $995 “Dad Remembered Steel Casket,” with “18 gauge steel high-gloss silver-blue finish.” Walmart is taking a share of the death care industry away from funeral homes and related companies.  According to the casket industry, the impact of the big box retailers is still small.  Other industry experts suggest otherwise.

As of December 31, 2007, Carriage Services operated 139 funeral homes in 25 states and 32 cemeteries in 11 states; and the company is based in Houston, Texas (that’s important, read on).  As of a week ago it is operating under a new CFO.  A month before that the company instituted a $5 million share buyback.  But if you look at the chart and action you might think that suddenly people are too financially strapped to die or are at least too strapped to pay for a decent funeral when they do die.  This has fallen from late-2007 highs of over $11.00 and shares are now challenging 52-week lows and with one more day like today would be back under $6.00.

This stock came back from the grave (no pun intended) after goingdown to essentially $1.00 at the lows of 2000 and 2001.  Before youstart throwing a reward party for it still being up over 400% look backinto the 1990′s and you’ll see that this used to be a $20.00 stock.What is interesting is that the company is still making money.  It isalso barely covered by Wall Street. 

If you have followed the funeral home sector very long you likelyknow that Service Corp. International (NYSE: SCI) recently made anoffer (around $881 million) to Jefferson, Louisiana-based StewartEnterprises Inc. (NASDAQ: STEI) which was rejected.  Stewart’scompany’s market cap is $751 million today.  Service Corp.International has a market cap of $2.51 Billion as of today and itsshares are only about 7% above 52-week lows.  Guess where Service Corp.is based…. Yep, Houston.

We wanted to look up some key data on Capital IQ as well.  Thecompany has board members that are well heeled in with investment andprivate equity funds as well.  Capital IQ does note that it has activetakeover defenses, so even the hint of any deal would have to be onewhere management either deemed friendly or one that the board wants.Here are some of Capital IQ’s Anti-takeover defenses listed:

• It has a classified board,
• directors can only be removed for cause,
• it takes 80% of shareholders needed to remove a board member,
• board members are indemnified, 
• it has an active poison pill provision with no weakening provision,
• it can issue blank check preferred stock,
• and insiders own a decent chunk of stock.

Carriage Services is far smaller in size than the others as itsmarket cap is a mere $119.5 million.  If the company wants to at leastput in an implied floor in the stock, there are at least a couplelarger companies the company could call to see if there’s any interest.

As far as the initial question if people are currently too poor inthe current environment, Service Corp.International on its websiteoutlines how about 13% of the company’s current revenues are economically sensitive.

Jon C. Ogg
July 18, 2008

While "old folks homes" might sound derogatory in name, it shouldn’t be thought of that way.  Not at all.  247WallSt.com looks for sectors that we believe can enjoy secular growth.  The oldest of the Baby Boomer generation is just now entering the very first stages of retirement age, and many of their parents are still alive and many are in need of assisted living care.  Combine this with more future demand than current supply can meet, and all of a sudden you have the formula for a secular growth and income story.   

Below is an orderly report calendar for the top stocks in this sector that are reporting earnings this week:

Capital Senior Living Corp. (NYSE: CSU) reports earnings after marketclose today. Estimates from First Call for this quarter are $0.07 EPSon $48.68 million in revenues. Estimates for next quarter are $0.07 EPSon $49.46 million in revenues. Estimates for fiscal Dec-2008 are $0.28EPS on $199.10 million in revenues. Analysts have an average pricetarget of $11.00 and the 52-week range is $6.32 to $11.78. CapitalSenior Living is trading at $8.33 in Tuesday mid-day trading.  As areminder, this one may actually be up for sale and hopefully we’ll hearmore about that today.  Has not yet paid dividend.

Brookdale Senior Living Inc. (NYSE: BKD) reports earnings Wednesdayafter market close. Estimates from First Call estimates don’t lookquite as strong for this retirement home operator. For this quarterestimates are -$0.34 EPS on $481.89 million in revenues. Estimates fornext quarter are -$0.31 EPS on $488.59 million in revenues. Estimatesfor fiscal Dec-2008 are -$1.16 EPS on $1.97 billion in revenues.Analysts have an average price target north of $29.00 and the 52-weekrange is $20.46 to $48.41. Brookdale Senior Living is trading at $26.49in Tuesday mid-day trading.  The company is now just under one CEOrather than a dual CEO structure.  Well off of highs, has a 3.7%dividend yield.

Senior Housing Properties Trust (NYSE: SNH) reports earnings Wednesdaymorning. Estimates from First Call estimates for this quarter estimatesare $0.43 EPS on $50.67 million in revenues. Estimates for next quarterare $0.43 EPS on $55.03 million in revenues. Estimates for fiscalDec-2008 are $1.74 EPS on $224.25 million in revenues. Analysts have anaverage price target north of $23.00 and the 52-week range is $16.22 to$25.21. Today, they announced plans to buy 48 buildings for $565million from HRPT Properties Trust. Senior Housing Properties istrading at $23.40 in  Tuesday mid-day trading.  Stock has a high 5.8%dividend yield right after a 2.5% drop since the company announced itwas acquiring 48 buildings from HRPT Properties for some $565 million.Senior Housings market cap is only $2.2 Billion (may not reflect recentsales).

Sunrise Senior Living Inc. (NYSE: SRZ) reports earnings Thursday aftermarket close. Estimates from First Call estimates for this quarterestimates are $0.29 EPS on $526.56 million in revenues. Estimates fornext quarter are $0.32 EPS on $535.88 million in revenues. Estimatesfor fiscal Dec-2008 are $1.31 EPS on $2.16 billion in revenues.Analysts have an average price target of $20.00 and the 52-week rangeis $16.27 to $42.97. Sunrise Senior Living is trading at $22.29 inTuesday mid-day trading.

No report on nursing homes and elderly care facilities would seemcomplete without the end game company which we will all ultimately beclients of.  Service Corp. International (NYSE: SCI), the funeral andcemetery giant, also reports earnings Wednesday after market close.Estimates from First Call estimates for this quarter estimates are$0.18 EPS on $592.71 million in revenues. Estimates for next quarterare $0.13 EPS on $554.45 million in revenues. Estimates for fiscalDec-2008 are $0.61 EPS on $2.25 billion in revenues. Analysts have anaverage price target north of $14.00 and the 52-week range is $9.30 to$14.50. Service Corp. International is trading at $11.12 in Tuesdaymid-day trading.

Jon C. Ogg
May 6, 2008

Winners: MSFT, CSCO, GOOG, AAPL, RIMM, VMW, EMC, KO, YUM, MCD, BIDU, CROX, DELL, SCI, GS, STT, NYX, TXT; Losers (maybe): XOM, SLB, NOV, AMZN, FSLR.

24/7 Wall St. recently showed "a quarter-end statement" list of stocksthat would have been a beneficiary of traditional quarter-end windowsdressing.  If you thought that a quarter was an important time forWindow Dressing, October 31 is a much more critical date as it marksthe fiscal year-end for most mutual funds.  So these stocks that areheld at that time are what will appear in the annual report for everyfund.

But there is a new list as many of these cycle out, particularly afterearnings. Now that earnings have come out on many and now that manysectors have made there moves, the list would be quite different thanthe prior list.  We didn’t show the returns on these since the end ofthe prior quarter and since the end of last month.  If you follow themarket very much uyou’ll know these are all either on year-highs or atleast have been solid stocks for more than just the last month.

Old Window Dressing names still likely on the list:

• Cisco Systems (CSCO), Google (GOOG), Apple (AAPL), Research inMotion (RIMM), VMware (VMW), Baidu.com (BIDU), & Crox (CROX). 

New likely candidates for Window dressing, even though some of theseshould have been mentioned last time around and were left off:

• Microsoft (MSFT), EMC (EMC), Dell (DELL), Coca-Cola (KO), Yum! Brands (YUM), McDonald’s (MCD)….
• Intuitive Surgical (ISRG) should have made the list before, butyou know it’s one of the year-end windows dressing beneficiaries.
• Goldman Sachs (GS) or State Street (STT) would be in the fewfinancials after recent woes, and it’s possible that NYSE Euronext(NYX) would make the list after being added to the S&P 500 Indexand after a monster run.
• Textron (TXT)would likely qualify as well.
• Service Corp. (SCI) has had a great quarter, but it’s year has been the best in any memory at all.

Likely booted off the list:

• Oddly enough, a true chartist might say that the oil and gasstocks that were a definite winner of window dressing in the calendarQ3 would not be in the windows dressing names.  Those go-to names wouldbe the likes of ExxonMobil (XOM), Schlumberger (SLB), and NationalOilwell Varco (NOV). Goldman Sachs oil call is adding pressure to thelist today, although it is hard to imagine even if oil saw anothermulti-day pullback that there would be a major panic selling in thestocks (although, that axe may have a very broad swing in bothdirections after the monster move we’ve witnessed there). There sureappears to be a sector rotation out of energy and into tech.
   
• Amazon.com (AMZN) may also be off the list since it pulledback on earnings, and if energy is pulling back then it’s likely thatFirst Solar (FSLR) would be off the old list since it is alternativeenergy and leveraged to oil prices in theory.

There is one key difference between the last round of window dressingand this round of window dressing.  It is quite possible that some ofthe funds won’t have to hold these again (or at least with as muchvigor nor with as much allocation) for a while until the next round ofwindow dressing.  The next window dressing surge doesn’t come until thecalendar year-end when independent money managers and other financialand fiduciary institutions have to embark upon their version of corewindows dressing. That leaves another 60 days before any criticaldecisions need to be made.

Obviously there were many other names that could be on this list, and no disrespect  nor neglect was meant to those stocks.

Jon C. Ogg
October 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter covering buyout candidates, spin-offs, restructurings, and more.  He does not own securities in the companies he covers.  Join our free email list here that previews some of the special situations and other key developments in M&A, regulation, market discrepancies, media coverage, and more.