Geo Group vs. CoreCivic: Which Stock is a Better Buy?

As Donald Trump prepares to be sworn in as the 47th president of the United States on Jan. 20, 2025, his administration has signaled an uncompromising approach to immigration, appointing former Immigration and Customs Enforcement (ICE) head Tom Homan as his “border czar.” Trump’s election victory and the appointment of Homan, who pledged earlier this year that he would lead the “biggest deportation force this country had ever seen” under Trump’s return to leadership, ignited a rally in private prison stocks The GEO Group, Inc. (GEO) and CoreCivic, Inc. (CXW).

These companies, which manage detention and rehabilitation centers, are positioned to capitalize on a potential surge in contracts with federal agencies focused on immigration enforcement. Isaac Boltansky, an analyst at BTIG, said in a Nov. 6 note to clients, that a second Trump administration would likely expand contracts with the U.S. Marshals Service and the Federal Bureau of Prisons.

More importantly, Boltansky pointed out that President-elect Trump’s “far more aggressive stance on border enforcement” would directly boost the ICE operations at both GEO Group and CoreCivic. With the U.S. bracing for more hawkish immigration policies, both GEO and CXW appear well-equipped to benefit. But which of these two stocks is a better buy now? Let's take a closer look to find out.

The Case for GEO Group Stock

Florida-based The GEO Group, Inc. (GEO) is a leading global provider of government services, specializing in the design, financing, development, and management of secure facilities, processing centers, and community reentry centers. With a broad range of services, including rehabilitation and post-release support, secure transportation, electronic monitoring, and correctional health care, GEO is a leading federal contractor.

The company operates 99 facilities with approximately 80,000 beds, including active, idle, and development projects, and employs nearly 18,000 people worldwide. Valued at $3.6 billion by market cap, shares of GEO Group have rallied a stunning 172% over the past year and 141% on a YTD basis, easily dwarfing the broader S&P 500 Index’s ($SPX)returns.

Along with attracting massive investor attention, GEO Group has also seen insider trading activity this year. In August, Executive Chairman George C. Zoley made a noteworthy purchase of 250,000 shares at an average price of $12.28 per share, amounting to approximately $3.07 million. This acquisition raised Zoley’s stake in the company to almost 3%, underscoring his strong confidence in GEO’s long-term prospects.

After the company reported its Q3 earnings results on Nov. 7, which fell short of Wall Street’s estimates, shares of GEO Group skyrocketed 13.6% on the very same day, driven by the renewed optimism surrounding Trump’s vow to implement the largest mass deportation of undocumented immigrants in U.S. history. The company’s total revenue of $603.1 million improved slightly from the year-ago quarter, while adjusted EPS of $0.21 marked a solid 10.5% annual jump. 

While CEO George C. Zoley acknowledged that the company’s Q3 results fell short of expectations, largely due to lower-than-expected revenues from its Electronic Monitoring and Supervision Services segment, he highlighted several potential growth opportunities across GEO’s diverse services platform, including the activation of 18,000 available beds in contracted and idle secure facilities, which could significantly boost the company’s financial performance.

Furthermore, despite the suspension of GEO’s dividend in 2021, Zoley’s comments in the Q3 earnings release about evaluating options to “return capital to shareholders in the future” have sparked speculation among investors that GEO Group may reinstate its dividend as it works to reduce debt and deleverage its balance sheet. By the close of Q3, GEO Group reported a net debt of approximately $1.7 billion alongside a solid cash position of around $71 million and total available liquidity of approximately $280 million, reflecting a stable financial foundation as it navigates its ongoing growth and capital management strategies.

Another major growth catalyst for the company came on Oct. 4, when ICE strengthened its partnership with GEO by exercising the first five-year option to extend the contract for the GEO-owned 1,940-bed Adelanto ICE Processing Center in California through Dec. 19, 2029.

The Adelanto Center, which provides secure housing and support care services, employs approximately 350 people. This continued collaboration solidifies GEO’s position as a key player in the nation's immigration enforcement infrastructure. 

Looking forward to fiscal 2024, management anticipates total revenue to hit $2.42 billion, while adjusted EPS is forecasted to land between $0.80 and $0.84. Also, adjusted EBITDA for the entire year is projected to range between $470 million and $480 million.

While coverage is light, Wall Street appears optimistic about GEO stock, with a consensus “Moderate Buy” rating overall. Of the three analysts offering recommendations, two advise a “Strong Buy,” and one suggests a “Hold.”

The average analyst price target of $32.33 indicates a 23.8% potential upside from the current price levels.

The Case for CoreCivic Stock

Tennessee-based CoreCivic, Inc. (CXW) is a leading diversified government solutions provider, offering services that include corrections and detention management, residential and non-residential alternatives to incarceration, and real estate solutions.

As one of the nation's largest owners of partnership correctional, detention, and residential reentry facilities, and one of the biggest prison operators in the U.S., CoreCivic has been a reliable and adaptable partner to government agencies for over 40 years. With a market cap of around $2.37 billion, shares of this private prison stock have outperformed the broader market, delivering gains of 54% over the past year and 47.5% on a YTD basis.

Following the company’s Q3 earnings results on Nov. 6, which smashed Wall Street’s estimates, shares of CoreCivic surged 25.6% in the subsequent trading session. The company reported total revenue of $491.6 million, up 2% year-over-year, and comfortably soared beyond Wall Street’s forecast of $469.8 million.

On an adjusted basis, the company’s normalized funds from operations (FFO) of $0.43 per share demonstrated an impressive 22.9% annual growth and topped estimates by a notable 34.4% margin. CoreCivic's balance sheet remains robust, with a net debt to adjusted EBITDA ratio of 2.2x, below the management target leverage range of 2.25x to 2.75x.

However, during the quarter, CoreCivic experienced a 3.4% drop in revenue from its largest government partner, ICE, compared to the same period last year. This drop was primarily due to the termination of its ICE contract at the South Texas Family Residential Facility in August 2024.

CoreCivic’s robust capital strategy includes a substantial share repurchase program. In 2024 alone, the company bought back shares worth $59.5 million. Since the program's inception in May 2022, CoreCivic invested almost $172.1 million in repurchases. With $177.9 million still left under the program as of September 30, CoreCivic remains poised to return capital to shareholders while maintaining a strong balance sheet.

For fiscal 2024, management has raised its guidance, now forecasting normalized FFO to range between $1.59 per share and $1.65 per share, an improvement from the prior range of $1.48 to $1.56 per share. Additionally, adjusted EBITDA is expected to arrive between $317 million and $321 million, surpassing the previous outlook of $302.4 million to $308.4 million, signaling strong performance ahead.

Overall, the mood on Wall Street is optimistic for CXW, with a consensus of “Moderate Buy.” Of the three analysts covering the stock, one advises a “Strong Buy,” and the remaining two recommend a “Hold.”

The average analyst price target of $25.33 indicates 18.2% potential upside from the current price levels.

GEO vs. CXW: Which Stock is a Better Buy?

Overall, both GEO Group and CoreCivic are well-positioned to benefit from the increased focus on immigration under a second Trump administration, but GEO Group stands out as the more attractive option. While both stocks have surged following their latest earnings reports, GEO's growth potential appears stronger. The company’s ability to expand ICE contracts and its diversified services give it a solid growth trajectory moving forward.

Additionally, GEO Group also benefits from notable insider buying, with Executive Chairman George Zoley’s purchase signaling strong confidence in the company’s future. In comparison, CoreCivic’s growth prospects are somewhat tempered by a decline in revenue from its largest government partner, ICE, and the termination of a major contract. While CoreCivic’s financials remain strong, GEO’s broader opportunities and potential dividend reinstatement could make it a more compelling choice for investors at the present moment.