Extra: Why Service Corp.'s Warning Could Deal a Death Blow to Stewart Enterprises

Talk about grave timing: Service Corp.'s (SRV Quote) warning that fourth-quarter earnings won't meet analysts' estimates precedes by a day or two the scheduled pricing of a stock offering by Stewart Enterprises (STEI Quote), which had hoped to raise as much as $250 million.

Stewart is the third-largest rollup of funeral homes and cemeteries behind Service Corp., whose stock was off 14 13/16, or 43%, to 19 5/8, and Loewen Group (LWN Quote), whose stock has been the picture of death since reporting disappointing earnings last year. (Its stock was off 5/8, or 12.5%, at 4 3/8.)

With Loewen and Service Corp. both blowing up, you can't help but wonder whether the concept of rolling up cemeteries and funeral homes is inherently flawed, and whether it's only a matter of time before Stewart -- stock deal or no stock deal -- will be the next to disappoint. (If that deal gets done, it'll be one tombstone that bankers will have earned!)

Especially troubling for Stewart, and potential buyers of its shares, is the primary reason Service Corp. -- the industry leader -- gave for the bad news: Reduced mortality rates in key markets. "Declining death rates pose a challenge for the industry," says Service President William Waltrip. If the death rate's decline doesn't reverse itself, he says earnings for the entire industry this year could be flat with last year's levels. ...