Park Lawn Corp. shares tumbled as much as 10.15 per cent on Friday after the funeral home and cemetery operator’s latest results disappointed investors as a slowing pandemic-era death rate rippled through its operations.
The Toronto-based company, which had 276 locations spanning 16 American states and three provinces as of May 16, late Thursday said its second-quarter net profit was flat at $5.8 million. On an adjusted basis, its profit sank 34.7 per cent to $0.19 per share. Analysts tracked by Bloomberg were expecting $0.34 in per-share adjusted profit.
Revenue also missed expectations by a wide margin at $75.9 million for the second quarter, compared to an estimate for $101.1 million. The top-line performance represented 5.4 per cent year-over-year growth thanks to acquisitions; so-called organic revenue fell during the quarter.
“As the death rate normalized over the second quarter, we experienced a meaningful decrease in national mortality which affected our cemetery operations more significantly than our funeral homes. Specifically, we saw a decrease in our at-need cemetery sales as a direct result of the decrease in the death rate,” said Park Lawn chief executive officer J. Bradley Green in a release.
Park Lawn was on a steep growth trajectory in recent years as COVID-19 took hold. In the second quarter of 2020, for instance, the company’s second-quarter revenue surged 44.6 per cent year-over-year.
Its shares soared 160 per cent from April 1, 2020 to their recent high in early January; since then, the stock shed 28.18 per cent of its value through the close of trading Friday.
“COVID-19 deaths in the U.S. appear to have reached a fairly steady rate, breaking from the prior pattern of waves, unless the recent uptick continues to surge. Assuming no further waves materialize, as we lap comparable periods with much more elevated volumes, Park Lawn faces stiff [comparison],” wrote National Bank of Canada analyst Zachary Evershed in a note to clients Thursday night.
“We note, however, that loosened restrictions allow for larger services and [Park Lawn] has increased pricing, likely providing a partial offset,” he added.
Evershed has an outperform recommendation (the equivalent of a buy) on Park Lawn shares, and a price target of $45.00 per share.
All nine analysts tracked by Bloomberg have buy recommendations on Park Lawn, with a consensus 12-month price target of $44.75 per share, representing a potential return of 49.2 per cent.
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