Reflecting On Specialized Consumer Services Stocks’ Q3 Earnings: ADT (NYSE:ADT)

As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the specialized consumer services industry, including Service International and its peers.

Some 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.

The 11 specialized consumer services stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was in line.

In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.

Service International

Founded in 1962, Service International is a leading provider of death care products and services in North America.

Service International reported revenues of $1.06 billion, up 4.4% year on year. This print exceeded analysts’ expectations by 1.5%. Overall, it was a satisfactory quarter for the company with a decent beat of analysts’ revenue estimates but a miss of analysts’ Funeral revenue estimates.

Interestingly, the stock is up 4.9% since reporting and currently trades at $84.

Best Q3: Matthews

Originally a death care company, Matthews International is a diversified company offering ceremonial services, brand solutions and industrial technologies.

Matthews reported revenues of $318.8 million, down 28.6% year on year, outperforming analysts’ expectations by 9.6%. The business had a very strong quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.

Matthews pulled off the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 11% since reporting. It currently trades at $27.36.

Slowest Q3: 1-800-FLOWERS

Founded in 1976, 1-800-FLOWERS is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.

1-800-FLOWERS reported revenues of $215.2 million, down 11.1% year on year, falling short of analysts’ expectations by 1.2%. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a slight miss of analysts’ revenue estimates.

1-800-FLOWERS delivered the weakest performance against analyst estimates in the group. Interestingly, the stock is up 34.5% since the results and currently trades at $4.70.

Read our full analysis of 1-800-FLOWERS’s results here.

H&R Block

Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.

H&R Block reported revenues of $203.6 million, up 5% year on year. This number topped analysts’ expectations by 1.5%. It was a strong quarter as it also put up a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ adjusted operating income estimates.

H&R Block scored the highest full-year guidance raise among its peers. The stock is down 18.3% since reporting and currently trades at $42.05.

Read our full, actionable report on H&R Block here, it’s free.

WeightWatchers

Known by many for its old cable television commercials, WeightWatchers is a wellness company offering a range of products and services promoting weight loss and healthy habits.

WeightWatchers reported revenues of $172.1 million, down 10.8% year on year. This result beat analysts’ expectations by 6.6%. Overall, it was a strong quarter as it also recorded a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ revenue estimates.

The stock is down 27.8% since reporting and currently trades at $23.98.

Read our full, actionable report on WeightWatchers here, it’s free.

Over the past six months, Carriage Services’s stock price fell to $43.25. Shareholders have lost 7.7% of their capital, which is disappointing considering the S&P 500 has climbed by 10.5%. This may have investors wondering how to approach the situation.

Why Do We Think Carriage Services Will Underperform?

Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons you should be careful with CSV and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Carriage Services’s sales grew at a weak 5.7% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector.

2. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Carriage Services has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 12.6%, lousy for a consumer discretionary business.

3. New Investments Aren’t Moving the Needle

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Carriage Services’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Carriage Services, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 12.7× forward P/E (or $43.25 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment. We’d recommend looking at the most entrenched endpoint security platform on the market.

The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Mister Car Wash and the rest of the specialized consumer services stocks fared in Q3.

Some 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.

The 11 specialized consumer services stocks we track reported a mixed Q3. As a group, revenues missed analysts’ consensus estimates by 19.3% while next quarter’s revenue guidance was in line.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 5.5% since the latest earnings results.

Mister Car Wash

Formerly known as Hotshine Holdings, Mister Car Wash (NYSE:MCW) offers car washes across the United States through its conveyorized service.

Mister Car Wash reported revenues of $263.4 million, up 5.7% year on year. This print exceeded analysts’ expectations by 0.9%. Overall, it was a satisfactory quarter for the company with an impressive beat of analysts’ same-store sales estimates.

“We delivered a solid third quarter performance, underscoring the strength of our strategy, the resilience of our business model, and the dedication of our team,” said John Lai, Chairperson and CEO of Mister Car Wash.

Interestingly, the stock is up 7.1% since reporting and currently trades at $5.57.

Best Q3: Matthews

Originally a death care company, Matthews International is a diversified company offering ceremonial services, brand solutions and industrial technologies.

Matthews reported revenues of $318.8 million, down 28.6% year on year, outperforming analysts’ expectations by 9.6%. The business had a very strong quarter with a beat of analysts’ EPS and revenue estimates.

Matthews pulled off the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 5.2% since reporting. It currently trades at $25.94.

Slowest Q3: 1-800-FLOWERS

Founded in 1976, 1-800-FLOWERS is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.

1-800-FLOWERS reported revenues of $215.2 million, down 11.1% year on year, falling short of analysts’ expectations by 1.2%. It was a softer quarter as it posted a significant miss of analysts’ EPS and revenue estimates.

Interestingly, the stock is up 4.4% since the results and currently trades at $3.65.

Read our full analysis of 1-800-FLOWERS’s results here.

Frontdoor

Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor is a provider of home warranty and service plans.

Frontdoor reported revenues of $618 million, up 14.4% year on year. This result topped analysts’ expectations by 1.1%. More broadly, it was a mixed quarter as it also logged a decent beat of analysts’ EBITDA estimates but EBITDA guidance for next quarter missing analysts’ expectations.

Frontdoor scored the fastest revenue growth among its peers. The stock is down 13.2% since reporting and currently trades at $57.09.

Read our full, actionable report on Frontdoor here, it’s free for active Edge members.

ADT

Founded in 1874 and headquartered in Boca Raton, Florida, ADT is a provider of security, automation, and smart home solutions, offering comprehensive services for home and business protection.

ADT reported revenues of $1.30 billion, up 4.4% year on year. This print was in line with analysts’ expectations. Aside from that, it was a mixed quarter as it also produced a beat of analysts’ EPS estimates but a miss of analysts’ customers estimates.

ADT had the weakest full-year guidance update among its peers. The stock is down 8.6% since reporting and currently trades at $8.04.

Read our full, actionable report on ADT here, it’s free for active Edge members.

The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how specialized consumer services stocks fared in Q3, starting with Matthews .

Some 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.

The 11 specialized consumer services stocks we track reported a mixed Q3. As a group, revenues missed analysts’ consensus estimates by 19.3% while next quarter’s revenue guidance was in line.

While some specialized consumer services stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.4% since the latest earnings results.

Best Q3: Matthews

Originally a death care company, Matthews International is a diversified company offering ceremonial services, brand solutions and industrial technologies.

Matthews reported revenues of $318.8 million, down 28.6% year on year. This print exceeded analysts’ expectations by 9.6%. Overall, it was a very strong quarter for the company with a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.

Matthews pulled off the biggest analyst estimates beat of the whole group. Unsurprisingly, the stock is up 9.5% since reporting and currently trades at $27.00.

H&R Block

Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.

H&R Block reported revenues of $203.6 million, up 5% year on year, outperforming analysts’ expectations by 1.5%. The business had a strong quarter with an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ adjusted operating income estimates.

H&R Block pulled off the highest full-year guidance raise among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 15.4% since reporting. It currently trades at $43.53.

1-800-FLOWERS

Founded in 1976, 1-800-FLOWERS is an online retailer of flowers, gifts, and gourmet foods, serving customers globally.

1-800-FLOWERS reported revenues of $215.2 million, down 11.1% year on year, falling short of analysts’ expectations by 1.2%. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a slight miss of analysts’ revenue estimates.

Interestingly, the stock is up 33.3% since the results and currently trades at $4.66.

Read our full analysis of 1-800-FLOWERS’s results here.

Pool

Founded in 1993 and headquartered in Louisiana, Pool is one of the largest wholesale distributors of swimming pool supplies, equipment, and related leisure products.

Pool reported revenues of $1.45 billion, up 1.3% year on year. This result was in line with analysts’ expectations. Aside from that, it was a mixed quarter as it also produced full-year EPS guidance slightly topping analysts’ expectations but organic revenue in line with analysts’ estimates.

The stock is down 20.5% since reporting and currently trades at $236.57.

Read our full, actionable report on Pool here, it’s free for active Edge members.

Mister Car Wash

Formerly known as Hotshine Holdings, Mister Car Wash (NYSE:MCW) offers car washes across the United States through its conveyorized service.

Mister Car Wash reported revenues of $263.4 million, up 5.7% year on year. This number beat analysts’ expectations by 0.9%. Overall, it was a satisfactory quarter as it also recorded a solid beat of analysts’ same-store sales estimates.

The stock is up 8% since reporting and currently trades at $5.62.

Read our full, actionable report on Mister Car Wash here, it’s free for active Edge members.