Could prison companies get a boost from Trump's immigration policies?
The Trump administration could be a boon for business for private prison companies in the U.S. if the president-elect delivers on his promise to crack down on illegal immigration.
CoreCivic and Geo Group, the two biggest private prison operators in the U.S., both contract with the U.S. Immigration and Customs Enforcement (ICE) to house detained, undocumented migrants. Their stocks soared Wednesday following Trump's election win, with investors betting the companies will see increased profits from a tough-on-immigration administration.
CoreCivic, which closed at $13.50 a share on November 5, is trading at $22 a share, while Geo Group, which closed at $15 a share Tuesday, is currently trading at $23.75.
"Obviously, investors believe there is going to be a significant increase in opportunity for both of these firms under the Trump administration," Noble Capital Markets analyst Joe Gomes told CBS MoneyWatch.
Geo Group executives acknowledged on the company's third-quarter earnings call Thursday that it expects the incoming administration to enact stricter border security policies and that the company stands "ready to provide additional resources to help ICE meet future needs."
CoreCivic executives also said they believe the election result will drive demand for its services.
ICE is biggest customer
During Trump's first term in office, from 2017-2021, immigration detention expanded at record levels, according to an ACLU report. In 2019, ICE detained an average of over 50,000 people each day. At times, that number exceeded 56,000 — about 50% more than peak levels during the Obama administration, according to the report. During his first term in office, Trump expanded the federal government's use of private prison companies to detain immigrants.
As of January 2020, 81% of people detained in ICE custody across the U.S. were held in facilities owned or managed by private prison corporations, according to the ACLU report.
In his second term, President-elect Trump promises a radical shift in policy at the U.S.-Mexico border from his predecessor. That includes a pledge to oversee the largest deportation operation in American history, which could bring significantly more business to CoreCivic and Geo Group.
For the first nine months of 2024, ICE accounted for 30% of each company's revenue.
Both Geo Group and CoreCivic said they currently have excess capacity to accommodate a larger population of detainees. CoreCivic executives noted that they're taking steps to prepare to activate additional capacity to meet ICE's needs. That could include reconfiguring facilities to accommodate a bigger intake area, they noted.
"There is room for an uptick in occupancy from a capacity standpoint and both companies expect an ask from the Trump administration for more beds. The question is how much, and we just don't know right now," Wedbush Securities analyst Brian Violino told CBS MoneyWatch.
Monitoring
Geo Group also provides monitoring services for ICE under its Intensive Supervision Appearance Program (ISAP), a monitoring program using wearable technology that serves as an alternative to detention.
"If there is a finite number of beds and a significant number of people are detained, which Trump is discussing in his plans, there could be an increased usage in this alternative to detention," Violino said.
Geo Group executives said they have the necessary technology and staffing resources to scale up the contract to more than several million participants, if necessary.
Funding from Congress
The degree to which ICE expands its contracts with the two largest private prison companies depends on how big of an increase in funding Congress authorizes. While Republicans won the Senate majority in Tuesday's election, it remains to be seen which party will obtain control of the U.S. House of Representatives.
"That's a big part of the story, and if it's a Republican sweep, it will be easier for Trump to get funding from Congress to support this operation he's looking to do," Violino said.
