The Trump administration released its Skinny Budget, or a general outline of the upcoming fiscal year's budget proposal. The budget suggests highlights significant expansion in ICE [Immigration and Customs Enforcement] and criminal alien capacity, Canaccord Genuity’s Michael Kodesch said in a report.
As the Street takes in the implications of this budget, there could be further upside to shares of The GEO Group Inc GEO and Corecivic Inc CXW, Kodesch noted, while maintaining Buy ratings on both companies. The price target for GEO is $50, while that for CoreCivic is $34.
Possible Implications
The Department of Homeland Security proposal includes an increase of about $1.5 billion to the 2017 annualized continuing resolution [ACR] for the specific expansion of detention, transportation, and removal of illegal immigrants.
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Kodesch wrote, “We note that if just a third of that ended up being approved for the expansion of detention capacity, we estimate ICE would be looking for over 18,000 beds using GEO's most recent ICE contract at Folkston, which called for 780 owned beds generating approximately $21M in revenues.”
The budget proposal also includes a reduction of $1 billion in prison construction at the Department of Justice, an additional spending of $171 million for criminal alien detention at the DOJ, and the hiring of 1,500 new DHS border employees. All these features “signal the administration's intentions,” the analyst commented.
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