Private prison stocks The GEO Group Inc GEO and Corecivic Inc CXW were two of the biggest market gainers following President Donald Trump’s election victory in November 2016.
Yet government funding for additional private prison beds is conspicuously absent from the fiscal 2018 Congressional appropriations package, and Height Capital Markets said Thursday that the outlook for private prisons in fiscal 2019 is also dim.
Trump was in favor of increasing funding for an additional 4,676 private prison beds for undocumented immigrants. The president is reportedly unhappy that the 2018 appropriations package does not include funding for additional beds, but Height said Trump will be forced to accept the funding package rather than force another government shutdown.
“Trump requested a similar increase in funding to this program for next year, fiscal 2019, but we are doubtful that Congress will be in a position to put additional funding toward this program at that time, considering Democrats (who oppose this funding) are likely to gain seats (at least in the House) this November and will therefore have a stronger hand after the midterm elections,” according to Height.
The GEO Group and Corecivic both skyrocketed after Republicans gained full control of the White House and Congress in 2016. Both stocks are down roughly 30 percent in the past year after Republicans failed to put their money where their mouths were when it comes to prisons.
Assuming the budget bill is passed without additional prison funding, Height said prison investors should expect the fiscal 2019 bill to be finalized in November or December of 2018.
Corecivic shares were down more than 1 percent at the time of publication Thursday, while Geo shares were up 0.34 percent.
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