Barclays on Private Prisons: Lock in Now for the Long Term
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Price: $31.72 --0%
Rating Summary:
7 Buy, 4 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
7 Buy, 4 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays on Private Prisons: Lock in Now for the Long Term
Barclays analyst, Manav Patnaik, said, "In our view, the sell-off in the shares of private prison operators The Geo Group (NYSE: GEO) and Corrections Corp of Am (NYSE: CXW) is likely tied to state budget concerns in a soft economy, and its impact on (a) per-diems, and (b) 'early-release' risks. We view these concerns as overdone, making both stocks attractive at current levels, but we prefer GEO for its business diversification."
"On per-diem risks, we witnessed in the 2001 recession and the most recent
2008-2010 financial crisis, that Feds (~40% of revenues) honor their contractual price increases (as they can run on deficits), while the states, almost in mutual agreement with the private operators keep them flat. As a result, total company per-diems have actually shown modest growth during the recessionary periods. Only CXW has faced six or so smaller states that have requested per-diem decreases, but were also willing to take cost cuts (removing vocational type programs) in order to maintain margins."
Barclays analyst, Manav Patnaik, said, "In our view, the sell-off in the shares of private prison operators The Geo Group (NYSE: GEO) and Corrections Corp of Am (NYSE: CXW) is likely tied to state budget concerns in a soft economy, and its impact on (a) per-diems, and (b) 'early-release' risks. We view these concerns as overdone, making both stocks attractive at current levels, but we prefer GEO for its business diversification."
"On per-diem risks, we witnessed in the 2001 recession and the most recent
2008-2010 financial crisis, that Feds (~40% of revenues) honor their contractual price increases (as they can run on deficits), while the states, almost in mutual agreement with the private operators keep them flat. As a result, total company per-diems have actually shown modest growth during the recessionary periods. Only CXW has faced six or so smaller states that have requested per-diem decreases, but were also willing to take cost cuts (removing vocational type programs) in order to maintain margins."
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