Market Overview

For Prison Stocks, Trump Admin Is A Long-Term Catalyst With Some Short-Term Concerns

Share:
For Prison Stocks, Trump Admin Is A Long-Term Catalyst With Some Short-Term Concerns
Related GEO
Jim Cramer Advises His Viewers On GEO Group, Nokia, WWE And More
22 Stocks Moving In Monday's Pre-Market Session
Related CXW
Earnings Scheduled For February 19, 2019
24 Stocks Moving In Tuesday's Pre-Market Session
CoreCivic Declares Quarterly Cash Dividend of $….44 Per Share (GuruFocus)

Under the Trump administration, the Immigration and Customs Enforcement budget allocation is likely to be “sizable,” providing significant growth opportunity for private operators, Canaccord Genuity’s Michael Kodesch said in a report. He added that while there are some near-term concerns, there is upside for both The GEO Group Inc (NYSE: GEO) and Corecivic Inc (NYSE: CXW).

While maintaining a Buy ratings on both companies, Kodesch mentioned that he preferred GEO to CoreCivic in view of the latter’s “inherent near-term headwinds.” The price target for GEO is at $50 and that for CoreCivic at $34.

Skinny Budget Suggests Upside

Trump's Skinny Budget suggested significant expansion in ICE capacity in the near term. Both GEO and CoreCivic seem to be “entering a sustained period of pro-private, tough-on-crime policies” as well as significant immigration reform, Kodesch stated.

“After reviewing the proposals related to the DHS [Department of Homeland Security] and DOJ [Department of Justice], we believe the current administration is targeting material ICE and criminal alien capacity expansion. As the implications of this budget get digested by the Street, we see further upside to GEO and CXW shares,” the analyst wrote.

Near-Term Concerns

GEO is down 60 prisoners to 2,197 prisoners quarter to date, representing a 2.7 percent decline. During the same time frame, CoreCivic witnessed a 5.1 percent decline in total California populations, including a 9.5 percent decline in out-of-state prisoners.

“We believe population decreases may continue to slow in the BOP’s [Bureau of Prisons] system as a result of the Fair Sentencing Act running its course and a new administration with a tough-on-crime background entering the fray,” Kodesch said.

Related Links:

Expect Further Upside In CoreCivic, GEO Group

Breaking Down Trump's 'Skinny Budget'

Latest Ratings for GEO

DateFirmActionFromTo
Feb 2019JP MorganDowngradesOverweightNeutral
Aug 2017Canaccord GenuityMaintainsBuy
Jul 2017JP MorganInitiates Coverage OnOverweight

View More Analyst Ratings for GEO
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas Politics Reiteration Top Stories Economics Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (CXW + GEO)

View Comments and Join the Discussion!

The Market In 5 Minutes

Benzinga's Top Upgrades, Downgrades For March 27, 2017