GEO Group (GEO) Stock Soars After Fed Renews Contract

Shares of GEO Group, Inc. (GEO) were trading up +2.08 or +10.66 percent to $21.59 per share in Friday’s premarket after having lost almost -40 percent in the previous trading session. The company announced early this morning that the Federal Bureau of Prisons had renewed a contract for a Georgia prison facility through 2018. GEO Group, Inc. stock closed at $19.51, down -12.78 or -39.58 percent in Thursday’s regular trading session.

Stock Analysis

Boca Raton, Florida based The GEO Group, Inc. was originally founded in 1984 as the Wackenhut Corrections Corporation.
The company is a multinational corporation that provides correctional and detention management, as well as reentry and community services to federal, state and local government agencies. GEO operates maximum, medium and minimum security prisons, immigration detention centers and mental health and residential treatment facilities.

The company maintains facilities in North America, South Africa, the United Kingdom and Australia.
GEO Group (GEO) Stock Soars After Fed Renews Contract
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GEO had its initial public offering in 1994. GEO’s global operation includes management or ownership of 104 facilities with an approximate total of 87,000 beds and employs more than 20,500 professionals.

The Justice Department announced yesterday that it would phase out the services of operators of for-profit prisons, which severely affected the stock price of GEO Group and rival Corrections Corp. of America (CXW). GEO stock declined almost -40 percent in yesterday’s regular trading session, the stock’s worst routing since the company went public in 1994.

A memo from Deputy Attorney General Sally Yates sent to the Federal Bureau of Prisons (BOP)  recommended that officials not renew their contracts with private prison companies when they expire, or reduce their scope significantly. The decision came about from a report by the Department of Justice Inspector General, which found that the levels of safety and security were lower than their state run counterparts.

This morning, the company announced that the Federal Bureau of Prisons had extended its contract for the company’s D. Ray James Correctional Facility in Georgia. The BOP contract extension for the facility with GEO runs through September 30th of 2018 under the company’s existing contract that is effective until September 30th, of 2022.

Chairman and Chief Executive Officer of GEO, George C. Zoley stated in the company’s press release that, “We are very appreciative of the continued confidence placed in our company by the Federal Bureau of Prisons with this important contract renewal. Our company-owned D. Ray James Correctional Facility provides cost-effective, high-quality services on behalf of the Federal Bureau of Prisons. We believe that this contract renewal is indicative of the BOP’s continued focus on quality as it evaluates its current privately-operated facilities.”

GEO Group’s stock was pummeled on the Bureau of Prisons news. The stock traded as low as $16.26 per share on volume of over 25 million shares. Yesterday, GEO stock hit a low not seen since April of 2012, when the stock traded down to $19.50 per share. While today’s news has renewed interest in the stock, the decision to phase out for profit detention centers by the Fed will continue to put pressure on GEO stock.

Other News About GEO

SHAREHOLDER ALERT: Khang & Khang LLP Announces an Investigation of The GEO Group, Inc. for Possible Violations of Federal Securities Laws

Investigation is focused on whether GEO may have issued misleading or false statements to investors.

Is This the End of the Private Prison Industry?

Article on how the Justice Department decision will affect GEO Group and Corrections Corp. of America.

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Published on Aug 19, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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