CSV stock exploded higher in after-hours trading on October 28, 2021, after the company reported awesome beats and received a price target hike from analysts.
Carriage Services Announces Record Third Quarter and Nine Month Results
Carriage Services reports Q3 adjusted EPS of 82c versus the consensus estimate of 60c. The company reports Q3 revenueThe income statement provides a summary of a company's revenue and expenses over a specified period of time, typically a year or a quarter. It shows the company's total revenue, th... of $95.04M versus the consensus estimate of $83.52M.
HOUSTON, October 27, 2021 (GLOBE NEWSWIRE) — Carriage Services, Inc. (NYSE: CSV): Mel Payne, Chairman, and CEO, stated, “Our third quarter pre-COVID performance has historically been our lowest seasonal performance quarter because of low seasonal death rates related to warm weather before the flu season, as well as our 75% funeral/25% cemetery portfolio revenue mix. Yet our third quarter 2021 performance with Total Revenue of $95.0 million, Field EBITDA of $44.7 million (Field EBITDA Margin of 47.0%), Adjusted Consolidated EBITDA of $32.4 million (Adjusted Consolidated EBITDA Margin of 34.1%), Adjusted Diluted EPS of $0.82, and Adjusted Free Cash FlowThe cash flow statement provides a detailed overview of the cash inflows and outflows of a company over a specified period of time. It includes cash received from operations, inves... of $25.9 million (Adjusted Free Cash Flow Margin of 27.3%), was the second-highest in our thirty-year history, almost equaling the historically highest performance metrics of this year’s first quarter during the peak spike in COVID deaths (first quarter Adjusted Diluted EPS was $0.81 but after proforma lower interest costs from our bond refinancing on May 13 was $0.90). All five of our field reporting segments executed at an extremely high level during the quarter, with revenue and margin growth accelerating with strong momentum throughout each month to a spectacularly strong September, indicating a likely strong finish to the year in the fourth quarter.
Just as we stated in our second quarter release dated July 27 in the section titled “Capital Allocation Framework,” we have since allocated $53.2 million to aggressively repurchase 1,203,493 of our shares at an average price of $44.24, a discount of 19.6% to the $55 per share bottom price of our opinion of the Roughly Right Range of Intrinsic Value Per Share on July 27. Based on the continuing high organic growth rate of all of our performance valuation metrics, as more fully described below, we are raising our opinion of Carriage’s Intrinsic Value Per Share by $10 per share to a Roughly Right Range of $65 to $75 per share. Since we restarted our Share Repurchase Program in the second quarter after our bond refinancing on May 13, we have repurchased 1,528,197 of our shares (8.5% of Total Outstanding) from “Mr. Market Rodney Dangerfield” for approximately $65.5 million or an average price of $42.89, a discount of 34.0% from the bottom price of $65 per share of our updated and increased Intrinsic Value Per Share Range.
We have entered a “Per Ownership Share Value Creation Sweet Spot” dynamic with accelerating high operating and financial performance and an “actually outstanding” share count that is rapidly shrinking. At the same time, our leverage profile is currently at 3.98 times and close to our upper sustainable policy limit of 4 times. I calculate a Non-GAAP share count equal to the actual number of shares outstanding of 16.65 million at September 30, 2021, after our YTD repurchases of 1,528,197, plus “in the money vested options” of 235,000, but not including 511,614 shares “in the money and price vested” under our Five Year Good To Great II Shareholder Value Creation Incentive Plan which is conditionally delivered in early 2025 to plan participants under a requirement that they are still employed at the end of 2024. My Non-GAAP proforma share count using this methodology becomes 16.885 million as of September 30, 2021. In contrast, our Adjusted Diluted share count for reporting purposes under GAAP on September 30, 2021, equals 18.246 million or 8.1% higher than my proforma share count.
As the largest individual shareholder and a self-taught professional investor, I care much more about my proforma share count number as the “current shareholder ownership reality” than the sometimes confusing GAAP methodology for diluted shares outstanding. It can actually be misleading in the short term when a company like Carriage has such a rapidly increasing earnings and Free Cash Flow profile in combination with a rapidly shrinking share count, yet the GAAP rule for diluted shares outstanding is a rolling multi-quarter average and also surprisingly includes price vested incentive shares that require 49 leader participants to be still employed at least in their current roles another 3¼ years to the end of 2024. For example, since the one time only Five Year Good To Great II Shareholder Value Creation Incentive Plan was approved on May 16, 2020, after our shares had plummeted to $14.38 per share during the COVID market crash, five senior participants have left the company who otherwise had they stayed would be currently price vested to receive 129,899 shares in early 2025 (25.4% of current total of 511,614), but received none upon their departure.
The GAAP share count rules-based methodology would seem much more appropriate for public enterprises that can’t, except in rare cases, execute a radical High-Performance Transformation within a two-year timeframe as Carriage has successfully done in 2020 and continues to do in 2021, especially since May 13 on a per-share basis. When we proforma Adjusted Diluted EPS for my proforma share count on September 30, 2021, and lower interest costs before our refinancing on May 13, the combined proforma impact of lower interest costs and fewer outstanding shares increases our reported Adjusted Diluted EPS from $0.82 to $0.89 in the third quarter of 2021, from $2.27 to $2.64 for the first nine months of 2021, and from $2.84 to $3.36 for the trailing twelve months ending September 30, 2021.
Our initial Roughly Right Range of Intrinsic Value Per Share on May 13 was $50 to $60 per share using our preferred valuation methodology of Free Cash Flow Equity Yield. The Intrinsic Value Per Share Range was raised by $5 per share in our second quarter release on July 27 and now $10 per share in this third-quarter release, so in only 5½ months, the midpoint of our opinion of Intrinsic Value Per Share Range has increased from $55 per share to $70 per share, an increase of $15 per share or 27.3%. Using our Proforma(1) Adjusted FCF of $81.2 million over the most recent twelve months performance period and our cost of capital of 6.4% as a FCF discount factor along with my Proforma Share Count at September 30 of 16.885 million, the Intrinsic Value Per Share based on FCF Equity Yield equals $75.14 per share, just above the $75 per share top price of our new Intrinsic Value Per Share Range. Since our current share price of $44.23 is 32.0% below the $65 per share bottom price of our new Roughly Right Range of Intrinsic Value, we will continue to place a high capital allocation priority on share repurchases during the fourth quarter while maintaining a moderate leverage position of about four times Total Debt to EBITDA.
During the third quarter, we began to process and qualify a much higher level of acquisition activity, some of which we expect to meet the highly selective Strategic Criteria of our Strategic Acquisition Model as well as our updated high ROIC Standards relative to other capital allocation options. We expect the pace of growth by acquisition to pick up in 2022 and beyond compared to 2020 and 2021 when the COVID Pandemic challenged many independent owners not part of a company like Carriage with all of its best-in-class support services. The COVID Pandemic challenges, together with the potential for a significant tax increase in capital gains taxes, have produced two compelling motivations for independent business owners to consider a succession plan solution sooner rather than later.
On May 13, we began stating publicly our opinion of Intrinsic Value Per Share within a Roughly Right Range of $10 per share between the bottom price and top price of the range, a valuation concept that commits our Senior Leadership Teams and Board of Directors (the “Board”) to execute our Capital Allocation Program with savviness, flexibility, discipline, patience, and wisdom to optimize the Intrinsic Value Per Share over time, especially over longer timeframes of five to ten years. We believe “Mr. Market Tom Brady” will sooner rather than later recognize the many value creation strengths of our Operating and Consolidation Platform, and over time our market price will align with our opinion of intrinsic value per share and produce long-term market-beating compounded shareholder returns.
THIRD QUARTER 2021 COMPARATIVE PERFORMANCE HIGHLIGHTS
- GAAP Funeral Operating Income of $22.9 million, an increase of $8.9 million or 64.0%;
- GAAP Cemetery Operating Income of $9.5 million, an increase of $0.5 million or 5.4%;
- GAAP Net Income of $13.0 million, an increase of $7.5 million equal to 136.1%;
- GAAP Net Income Margin of 13.7%, an increase of 720 basis points; and
- GAAP Diluted EPS of $0.71, an increase of $0.40 per share equal to 129.0%.
Carlos Quezada, Executive Vice President and Chief Operating Officer stated, “As Mel had previously discussed in our first and second-quarter earnings releases, and Steve Metzger will cover in detail later in this release, the increases in our record consolidated performance metrics, i.e., Adjusted Consolidated EBITDA/Margin, Adjusted and Proforma EPS, and Adjusted and Proforma Free Cash Flow/Margin in the third quarter and first nine months of 2021 compared to 2020 would have been even higher if not for the under accruals of primarily field incentive compensation in the first nine months of 2020 amidst the portfolio performance uncertainty of the early and middle phases of the COVID-19 Pandemic. Contrary to last year, we are fully accrued this year, as corporate and field incentive compensation in the third quarter of 2021 was $1.0 million or about 4 cents per share higher than the third quarter last year (using Adjusted Proforma shares of 16.885 million) and $5.7 million or about 25 cents per share higher in the first nine months of 2021 versus last year, which is more fully explained in our overhead section on Pages 10 and 11 of this release.
FIRST NINE MONTHS 2021 COMPARATIVE PERFORMANCE HIGHLIGHTS
- GAAP Funeral Operating Income of $65.4 million, an increase of $27.2 million or 71.4%;
- GAAP Cemetery Operating Income of $30.5 million, an increase of $12.0 million or 65.2%;
- GAAP Net Income of $19.8 million, an increase of $12.1 million equal to 156.5%;
- GAAP Net Income Margin of 7.1%, an increase of 390 basis points; and
- GAAP Diluted EPS of $1.08, an increase of $0.65 per share equal to 151.2%.
FIVE QUARTER TREND REPORT
Mr. Quezada continued, “We report our performance results publicly using the same highly transparent Non-GAAP “Trend Reports” that we use internally and which have been explained in previous shareholder letters, including Five Year and Five Quarter Trend Reports that reflect long and short term trends in our core operating, financial and overhead sectors over time. Shown on the next page are highlights from our Five Quarter Trend Report that reflect the accelerating transformative high-performance process that occurred at Carriage amid the COVID-19 Pandemic from the second quarter of 2020 through the peak of the Pandemic impact in the first quarter of 2021, which has continued through the third quarter and is reflected in our updated outlooks through 2022.
Carriage Services price target raised to $64 from $52 at Roth Capital
Roth Capital analyst George Kelly raised the firm’s price target on Carriage Services to $64 from $52 and reiterated a Buy rating on the shares following the Q3 report. The analyst says Carriage Services reported “another big quarter” with the same-store volume and pricing exceeding his estimates. Carriage is compelling given its “operational momentum, quality asset base, and discounted valuation,” Kelly tells investors in a research note.
Carriage Services price target raised to $60 from $52 at Barrington
Barrington analyst Alexander Paris raised the firm’s price target on Carriage Services to $60 from $52 and reiterated an Outperform rating on the shares. The analyst cites higher earnings projections for the target boost following the company’s Q3 beat.
CSV Stock Technical Analysis
When comparing the yearly performance of all stocks, we notice that CSV is one of the better-performing stocks in the market, outperforming 89% of all stocks. On top of that, CSV also shows an excellent and consistent pattern of rising prices.
Although CSV has an excellent technical rating, it does not present a decent entry opportunity at the moment. Prices have been extended to the upside lately. For an excellent entry, it is better to wait for a consolidation. Click here to sign up for email alerts on when CSV stock is a good entry.
Large players volume is starting to turn up, and we had a pocket pivot signal (blue dot).