Thursday, August 13, 2020

CoreCivic (CXW)

Deeper Dive into 2Q Results and C-Corp Announcement

CoreCivic Inc through its subsidiaries operates as a diversified Corrections Corporation of America, or CCA is a real estate investment trust involved in the ownership and operation of private prisons. CCA mainly controls medium-security correctional and detention facilities located throughout the U.S. The company derives the vast majority of its income in the form of management revenue from medium-term contracts. CCA is compensated on a per diem rate based on the bed capacity and range of services offered at its facilities. Total revenue for the company is split fairly evenly between contracts with federal agencies, such as the Federal Bureau of Prisons and US Marshals Service, and state entities, such as the State of California Department of Corrections and Rehabilitation.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

C-Corp Election. As noted in our Friday update, CoreCivic has elected to switch to a C-Corp beginning January 1, 2020. Dividends have been suspended. As a C-corp, the Company will be subject to taxes but management is confident the switch will enable the Company to pay down debt faster, provide financial flexibility, potentially lower its cost of capital, enable the Company to repurchase shares, and provide CoreCivic access to growth channels previously unavailable under the REIT construct.




For Shareholders? Obviously, for dividend seeking shareholders, the announcement removes a key pillar for holding the shares. Since the June 17th initial announcement, nearly 60% of CXW's shares have changed hands, suggesting the worst of the turnover may be behind the Company. Without a dividend, shareholders will be looking for ...

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report.  NOTE: investment decisions should not be based upon the content of this research summary.  Proper due diligence is required before making any investment decision.