Movers and SHAKERS
Thursday, August 6, 2020
Ditching REIT Status; 2Q Results In-Line
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.
REIT Status. Likely to no one's surprise, CoreCivic announced it is ditching its REIT status and converting to a C-Corp at year-end. We believe management took this step to address three key items: the chronic undervaluation of the stock, access to capital, and the opportunity to further diversify the operating model into services not permitted under the REIT construct. Cash dividends have been discontinued for the rest of the year.
Go Forward Capital Allocation. The near-term goal is to reduce leverage to 2.25x-2.75x from 4.2x at quarter's end. Following debt reduction is the return of capital to shareholders, either in buybacks (recall the Company repurchased $500 million over the 2009-2011 time frame) or possibly a new dividend. Finally, we expect ...
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.