Research Update: Carriage Services Inc. Rating Lowered To 'B' From 'B+' On Acquisitions, Underperformance; Outlook Stable

Houston-based death care company Carriage Services Inc.'s operating results demonstrated exposure to the declining death rate and inflation, and the company is increasing its pace of acquisitions at a time of weaker financial results. We now expect S&P Global Ratings-adjusted debt to EBITDA of about 6x in 2023 and expect leverage to remain above 5x potentially through 2025. As a result of our expectation for sustained elevated leverage, we lowered our long-term issuer credit rating to 'B' from 'B+'. We also lowered our senior unsecured issue-level rating to 'B' from 'B+'; the recovery rating on this debt remains '4'. The stable outlook reflects our expectation for adjusted debt to EBITDA to remain above 5x for a sustained period, based on

...- Houston-based death care company Carriage Services Inc.'s operating results demonstrated exposure to the declining death rate and inflation, and the company is increasing its pace of acquisitions at a time of weaker financial results. - We now expect S&P Global Ratings-adjusted debt to EBITDA of about 6x in 2023 and expect leverage to remain above 5x potentially through 2025. - As a result of our expectation for sustained elevated leverage, we lowered our long-term issuer credit rating to 'B' from 'B+'. We also lowered our senior unsecured issue-level rating to 'B' from 'B+'; the recovery rating on this debt remains '4'. - The stable outlook reflects our expectation for adjusted debt to EBITDA to remain above 5x for a sustained period, based on low-single-digit revenue growth in 2023-2025, adjusted EBITDA margins of 29%-30%, and limited free cash flow to repay debt until 2024....

Research Update