Rising concerns over multi-decade high inflation and the Fed’s aggressive interest rate increase plans to help the economy fight inflationary pressure are expected to foster an economic slowdown. And the Russia-Ukraine war and extended COVID-19 lockdowns in China could worsen matters. Deutsche Bank economists warned against a major U.S. recession, which might be caused largely by the Federal Reserve’s tighter monetary policy to restore price stability.
Amid the rising probability of a recessionary environment, investing in industries with high resilience to market fluctuations is wise. Given the inelastic demand for its products and services, the funeral services industry could be attractive to investors. The rising demand for funeral services is supported by the increase in mortality rates in the United States.
Given these factors, we think it could be wise to invest in fundamentally sound funeral services stocks Matthews International Corporation (MATW) and Hillenbrand, Inc. (HI) to protect your portfolio from a potential recession.
Matthews International Corporation (MATW)
MATW in Pittsburgh, Pa., offers brand solutions, memorialization products, and industrial technologies worldwide. The company’s Memorialization segment provides bronze and granite memorials, cremation memorialization products, granite benches, flower vases, cremation urns, cemetery features, caskets, and cremation equipment for the cemetery and funeral home industries.
Last month, MATW announced that its board of directors declared a quarterly dividend of $0.22 per share of the company’s common stock. The dividend is payable on May 23, 2022, to stockholders of record on May 9, 2022. The payment reflects the company’s strong financial position and its commitment to regularly delivering a portion of its earnings to shareholders.
MATW's sales increased 6.7% year-over-year to $444.98 million in its fiscal 2022 second quarter, ended March 31, 2022. The company’s sales from its memorialization segment improved 7.1% year-over-year to $220 million. Its net cash provided by operating activities amounted to $72.72 million as of March 31. In addition, its cash and cash equivalents came in at $53.78 million on March 31, 2022, compared to $49.18 million as of Sept. 30, 2021.
Analysts expect MATW's revenue for its fiscal year 2022, ending Sept. 30, 2022, to come in at $1.72 billion, representing a 2.9% rise year-over-year. The company has surpassed the consensus revenue estimates in each of the trailing four quarters. The Street expects the company's EPS for its fiscal year 2023 to come in at $3.47, representing 11.9% growth from the prior year. It has also surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock slumped 26.9% in price over the past year and closed yesterday's trading session at $30.28.
MATW's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
MATW has a B grade for Value, Growth, Stability, and Sentiment. Within the A-rated Industrial - Manufacturing industry, it is ranked #7 of 37 stocks. To see additional POWR Ratings (Momentum and Quality) for MATW, click here.
Click here to check out our Industrial Sector Report for 2022
Hillenbrand, Inc. (HI)
HI operates as a diversified industrial company in the U.S. and internationally. The Batesville, Ind.-based company’s Batesville segment designs, manufactures, and sells funeral services products and solutions. The product portfolio includes burial caskets, cremation caskets, containers and urns, and other personalization and memorialization products.
On February 11, HI’s board of directors declared a regular quarterly cash dividend of $0.22 per share on the company’s common stock. Its regular dividend payout reflects the company’s strong financials and ability to return value to the shareholders by utilizing its strong free cash flow.
Last December, HI announced that its board of directors authorized a new share repurchase program of $300 million, effective Dec. 2, 2021. The repurchase program supports the company’s overall capital allocation strategy, which focuses on reinvesting in the business, evaluating strategic acquisitions to accelerate the business growth, and returning value in the form of cash to shareholders through opportunistic share repurchases.
For its fiscal year 2022 first quarter, ended Dec. 31, 2021, HI's net revenue amounted to $728.40 million, registering a 5.2% increase from the prior-year period. The company’s revenue from its Batesville segment came in at $163 million. And its net cash provided by operating activities valued at $44.50 million for the fourth quarter.
The $2.98 billion consensus revenue estimate for fiscal 2023 represents a 2. 2% year-over-year increase. Analysts expect HI's EPS for the current quarter to come in at $0.97, representing a 14.1% rise year-over-year. It is no surprise that the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of HI declined 20% in price year-to-date and closed yesterday's trading session at $41.57.
HI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
HI has a B grade for Sentiment, Quality, and Value. Within the Industrial - Manufacturing industry, it is ranked #4 of 37 stocks. To see additional HI ratings (Momentum, Stability, and Growth), click here.
Click here to check out our Industrial Sector Report for 2022
MATW shares were trading at $30.79 per share on Tuesday afternoon, up $0.54 (+1.79%). Year-to-date, MATW has declined -15.50%, versus a -11.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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