Investor Confidence in Real Estate Trust GEO Group

GEO Group Inc. (NYSE: GEO), the real estate trust specializing in correctional and detention facilities, continues to experience climbing share price despite mixed signals on U.S. prison reform. There is a debate between the Trump administration and states. The administration was put into power partially due to the president’s tough on crime rhetoric. In contrast, states are steadily rolling back their efforts which, in the past, fell in line with the administration’s approach.

In the past few years, states have realized spending millions of dollars to incarcerate low level, non-violent criminals is a waste of precious resources. Resources that can be spent on much needed projects and services such as schools or infrastructure. In addition, imprisoning vast numbers of citizens have long term consequences from a social and economic standpoint. When people are removed from their communities for years, acclimation back into their lives and the workplace becomes extremely difficult in an ever-changing work and social environment,  The results of this self-analysis have led to a reduction in prison sentences and increased alternatives resulting in decreasing prison populations and increased savings. Over half of the country, including some of the most conservative states like Texas and Georgia, have adopted this viewpoint.

Far on the other side of this debate is the nation’s top law enforcement officer, Attorney General Jeff Sessions. He has consistently argued for tougher standards in drug cases, increasing minimum sentences, and has repeatedly voiced opposition to marijuana legalization. Sessions remains firm despite the states’ opposing stance on these issues.

This clash of ideals has not affected GEO’s stock price. At $31, it remains close to its all-time high of $34, a milestone reached this past April. The company released a favorable 1Q report in which they announced an $8 million increase in net income, and projected 2Q revenues to land in the $581 – $586 million range. GEO, with operations in the United States, Australia, South Africa, and the United Kingdom, has a market capitalization of $3.56 billion.

Leave a Comment