Market Overview

ICE Prison Bed Shortage Could Be A Private Prison Catalyst

ICE Prison Bed Shortage Could Be A Private Prison Catalyst

The current shortage of U.S. Immigration and Customs Enforcements (ICE) beds, coupled with areas of capacity constraints and state reforms aimed at alternative corrections, creates a growth opportunity larger than what has been witnessed in recent years, Canaccord Genuity’s Michael Kodesch said in a report.

Against this backdrop, there is low risk to contract renewals, which offers “a compelling investment opportunity,” Kodesch commenting. He added that The GEO Group Inc (NYSE: GEO) and Corecivic Inc (NYSE: CXW) are entering a “sustained period of pro-private, tough-on-crime policies alongside comprehensive immigration reform.”

While reiterating a Buy rating on both the stocks, the analyst kept the price targets unchanged at $50 for GEO and $34 for Corecivic.

Recent Developments

A recently passed Minnesota House plan to reopen 1,650 Corecivic beds at the Prairie Correctional Facility would soon be considered by the Senate and the Governor. This could generate $21 million a year for 550 prisoners, or $58 million at full capacity.

Meanwhile, lawmakers in Wyoming are considering a newly-build private prison and a sale leaseback structure to replace “a seemingly irreparable 650 bed public facility in the state,” Kodesch added.

With the government considering a large budget for ICE needs, the growth opportunity for private operators would be significant, the analyst mentioned, while adding, “As such, we continue to see upside and have BUYs on both REITs, but prefer GEO to CXW at present given CXW's inherent near-term headwinds.”

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Latest Ratings for GEO

Feb 2019DowngradesOverweightNeutral
Aug 2017MaintainsBuy
Jul 2017Initiates Coverage OnOverweight

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