Expectations that the incoming Trump administration will strengthen the country’s stance on mass migration have thrust companies managing detention centers for undocumented migrants into the limelight. These firms, such as CoreCivic (CXW), are expected to benefit immensely from the shift in policy, and the stock jumped over 78%, and 67% in the last five days overall. Immediately following the election. The company recently reported a solid third quarter, beating top-and-bottom-line expectations. This has been attributed to higher revenue driven by an increased population at its facilities and effective cost management.
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While revenue from ICE, its largest government partner, decreased by 3.4% compared to 2023, adjustments reveal a 10.9% increase year-over-year. The company has revised its 2024 financial guidance upwards, and with an expected jump in demand in 2025 and beyond, it looks likely to enjoy a robust growth trajectory.
CoreCivic’s Vast Footprint
CoreCivic manages correctional, detention, and residential reentry facilities. It is the largest private owner of real estate utilized by government agencies, managing over 15.8 million square feet of real estate used by the government. The company comprises three primary divisions: CoreCivic Safety, CoreCivic Community, and CoreCivic Properties.
CoreCivic’s facilities offer various rehabilitation and educational programs, such as basic education, faith-based services, life skills, and employment training. It also provides substance abuse treatments in an attempt to facilitate a complete turnaround in the lives of the individuals it serves.
CoreCivic’s Recent Financial Results & Outlook
The company reported results for the third quarter of 2024. Net income reached $21.1 million, compared to $13.9 million in 2023, while exceeding analysts’ expectations by $21.76 million. This increase was due to higher revenues from larger populations, higher rates at facilities, cost containment efforts, and reduced interest expenses. Decreased revenues from ICE, the company’s largest government partner, balanced out due to a significant increase in revenue from other ICE facilities.
EBITDA for the third quarter was $81.4 million, a jump from $72.8 million for the same period in 2023. Adjusted EBITDA, excluding special items, was $83.3 million for 2024 Q3, compared to $75.2 million in 2023. Meanwhile, Funds From Operations (FFO) was $47.1 million, compared to $38.5 million in 2023. These increases can be attributed to boosted occupancy and reduced staffing costs. Earnings per share (EPS) of $0.19 beat expectations by $0.10.
Management has updated financial guidance for 2024, anticipating an increase in key financial metrics. Net income is expected to range from $55.5 million to $61.5 million, compared to the prior guidance of $42.0 million to $50.4 million. Adjusted net income is anticipated to be about $78.0 million to $84.0 million, a rise from the previous $65.6 million to $73.6 million range. Diluted EPS and adjusted diluted EPS are also projected to increase, with new predictions at $0.49 to $0.55 and $0.69 to $0.75, respectively. Further, EBITDA and adjusted EBITDA are also anticipated to grow, while the company plans capital expenditures between $70.0 million and $76.0 million, maintaining the same as the previous guidance.
Is CXW Stock a Buy?
The stock had been fairly range-bound the past few years, with recent events sparking a significant jump. It trades at the high end of its 52-week price range of $10.74 – $18.24 and shows positive price momentum as it trades above all major moving averages. The P/S ratio of 1.3x is roughly in line with the Security & Protection Services industry average of 1.46x.
Analysts following the company had previously taken a cautious stance on CXW stock. No updates have been issued since the election, though it’s highly likely that recommendations and price targets will see an upward revision. Based on the most recent recommendations issued by four analysts, CXW is currently rated a Moderate Buy.
Closing Thoughts on CXW
CoreCivic is well-positioned to benefit from the expected changes in immigration policy that the incoming Trump administration will adopt. The stock has seen a remarkable boost post-election, with strong Q3 performance and revised financial guidance signaling further upside potential in the coming years. With recent financial strength and a promising future outlook, the stock is a compelling option for investors looking to take advantage of the shift in political realities in the U.S.
