Carriage Services (NYSE:CSV) Beats Expectations in Strong Q4, Guidance Less Exciting

Funeral services company Carriage Services (NYSE:)
reported Q4 FY2023 results topping analysts’ expectations, with revenue up 5.2% year on year to $98.8 million. The company expects the full year’s revenue to be around $385 million, in line with analysts’ estimates. It made a GAAP profit of $0.75 per share, improving from its profit of $0.53 per share in the same quarter last year.

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Carriage Services (CSV) Q4 FY2023 Highlights:

• Revenue: $98.8 million vs analyst estimates of $93.65 million (5.5% beat)
• EPS: $0.75 vs analyst estimates of $0.49 (52.3% beat)
• Management’s revenue guidance for the upcoming financial year 2024 is $385 million at the midpoint, in line with analyst expectations and implying 0.7% growth (vs 3.4% in FY2023)
• Management’s EPS (non-GAAP) guidance for the upcoming financial year 2024 is $2.25 million at the midpoint, below analyst expectations of $2.31
• Free Cash Flow of $12.8 million, down 40.2% from the previous quarter
• Gross Margin (GAAP): 35%, down from 37.2% in the same quarter last year
• Market Capitalization: $375.7 million

Carlos Quezada, Vice Chairman and CEO, stated, “We are pleased to announce our strong fourth quarter and full year 2023 results. Total revenue grew by 5.2% in the fourth quarter and 3.3% for the full year, despite the COVID “pull forward” impact resulting in modest declines in funeral contract volume experienced during the year.

Established in 1991, Carriage Services (NYSE:CSV) is a provider of funeral and cemetery services in the United States.

Specialized Consumer ServicesSome consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.

Sales GrowthReviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Carriage Services’s annualized revenue growth rate of 7.7% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That’s why we also follow short-term performance. Carriage Services’s recent history shines a dimmer light on the company as its revenue was flat over the last two years.

This quarter, Carriage Services reported solid year-on-year revenue growth of 5.2%, and its $98.8 million of revenue outperformed Wall Street’s estimates by 5.5%. Looking ahead, Wall Street expects sales to grow 1.3% over the next 12 months, a deceleration from this quarter.

Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Over the last two years, Carriage Services has shown decent cash profitability, giving it some reinvestment opportunities. The company’s free cash flow margin has averaged 13.6%, slightly better than the broader consumer discretionary sector.

Carriage Services’s free cash flow came in at $12.8 million in Q4, equivalent to a 13% margin and up 144% year on year.

Key Takeaways from Carriage Services’s Q4 Results
Revenue beat by a nice amount and EPS blew past analysts’ expectations this quarter. We were also excited its operating margin outperformed Wall Street’s estimates. On the other hand, full year guidance was less exciting , with revenue in line and EPS below. Overall, we think this was a really good quarter that should please shareholders. The stock is flat after reporting and currently trades at $25.08 per share.