The two largest US private prison operators, whose stocks once soared on the back of Donald Trump's presidential election win, are now grappling with a significant slump in their share prices. Both GEO Group Inc. (GEO.US) and CoreCivic Inc. (CXW.US) have seen their shares fall substantially from record highs and are on track to post their largest weekly declines since at least last November this week. These companies were poised to benefit from the Trump administration's pledge to detain millions of undocumented immigrants. Expectations, fueled by a Republican tax and spending bill allocating tens of billions of dollars to prison operations, supported stock prices until last summer. However, the reality has not fully matched these expectations for the two firms. Despite high-profile enforcement actions, the Department of Homeland Security has yet to meet its targets for detaining undocumented immigrants. Noble Capital Markets analyst Joe Gomes noted, "Despite the record funding provided by the 'Big and Beautiful' Act passed last year, the rate of increase in detainee numbers has been slower than many initially anticipated." He added that there was an expectation for detainee numbers to surge "in the blink of an eye."
CoreCivic is scheduled to report its fourth-quarter earnings after the US market closes on February 11th, with GEO Group following with its Q4 report the next day. Based on derivatives market activity, investors are bracing for potential swings of at least 7% in both stocks, reflecting growing uncertainty over the federal funding outlook. Furthermore, a substantial decline in the national crime rate has cast a shadow over the entire prison industry's prospects. Simultaneously, public perception of government enforcement actions is creating additional pressure. This follows a second incident where Immigration and Customs Enforcement (ICE) officers fatally shot a US citizen during an operation in Minneapolis, sparking widespread condemnation of the agency's tactics and threats of increased Congressional oversight or funding cuts. Trump's "border czar," Tom Homan, hinted that the Minnesota operation would be scaled back, while another operation in Maine was abruptly terminated.
GEO Group holds contracts with ICE to provide location tracking and detention services for undocumented immigrants, with approximately 60% of its projected $2.4 billion in 2024 annual revenue coming from the US government. Similarly, about half of CoreCivic's nearly $2 billion in revenue is derived from US government contracts. Raj Sharma, a stock analyst at Texas Capital Bank, stated, "This is the business they are in. Every time ICE is in the news, private prisons get exposure by association." He pointed out that both companies face significant "headline risk." When they last reported earnings, both firms were punished by the market for lowering their 2025 profit guidance—although CoreCivic attributed its revised outlook to start-up costs associated with new ICE contracts. At the time, its CEO expressed expectations for a rebound in 2026 performance as prison utilization rates increase.
GEO Group, meanwhile, hopes to break a pattern of stock declines following its past three earnings reports—despite the company having secured the largest volume of new business in its history during a single year. Sharma noted that part of the problem is that ICE has been concentrating resources on detention at the expense of purchasing GEO Group's location tracking and electronic monitoring services, a business line that CoreCivic does not possess. Following legislation last July that allocated $45 billion over four years to expand US detention capacity, both companies had anticipated a significant increase in contracts. The Trump administration plans to boost immigration detention capacity to at least 100,000 beds to meet a goal of deporting one million people annually. Reports indicated that around 40,000 individuals were detained by ICE when he took office last year; by early this month, that total had reached 73,000.
Matthew Tuttle, Chief Investment Officer and Founder of Tuttle Tactical Management, commented, "I think the previous expectations around immigration and how these two companies would benefit have not materialized, and I'm not terribly confident they will." He stated that these companies are not the "obvious Trump trades everyone thought they were." Nevertheless, both Sharma and Gomes still anticipate that these two stocks will outperform the market this year. Data shows they are not alone in this view among analysts covering the companies—there are currently no "Hold" or "Sell" ratings on either firm. Gomes concluded, "The numbers will continue to grow, based simply on the contracts they have for 2025, which should provide a good positive boost to revenue and EBITDA for both companies. Essentially, these stocks are now back to where they were before the election."
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