Friday, November 17, 2022
Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
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More Funding? In testimony before the U.S. Senate Committee on Appropriations, U.S. Department of Homeland Security Secretary Mayorkas expounded on the Biden Administration’s $8.7 billion supplemental funding request for DHS to cover projected shortfalls, enhance enforcement, and hire additional personnel.
More Beds. One of the key items was increased surge capacity of up to 46,500 ICE detention beds. Recall, the current budgeted amount is 34,000 beds, although the most recent ICE report indicates nearly 37,000 beds were being used as of October 3rd and press reports indicate the current number is closer to 40,000. Additional funding for transportation and the Alternatives to Detention (ATD) program also was requested.
Surge Continues. In October 240,988 people were encountered at the Southwest border, up from 231,529 a year ago and down only modestly from the 269,735 encountered in September. For all of fiscal 2023, there were 2,475,669 border encounters. We would note, in his testimony, Secretary Mayorkas stated that since May 12th, or approximately 6 months, 336,000 individuals have been removed or returned, a fraction of the nearly 1.3 million encounters since then, not to mention the historic numbers prior. And, recall, encounters only represent a portion of total border crossings.
What Does It Mean for CXW and GEO. Assuming the funding is passed, it will have a positive impact on CoreCivic (CXW) and The GEO Group (GEO), at least in the short-term. With CXW and GEO receiving roughly one-third each of new detainees any increase in the overall number of detainees should positively impact operating results, especially given that as of the end of the third quarter, both companies had the majority of their respective ICE facilities at or above the guaranteed minimum level. If the increased number of beds is sticky, it is possible ICE will seek additional facility capacity, potentially enabling CXW and/or GEO to restart a currently idled facility. Finally, any increase in the use of the ISAP program will benefit GEO.
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Senior Equity Analyst focusing on Basic Materials & Mining. 20 years of experience in equity research. BA in Business Administration from Westminster College. MBA with a Finance concentration from the University of Missouri. MA in International Affairs from Washington University in St. Louis.
Named WSJ ‘Best on the Street’ Analyst and Forbes/StarMine’s “Best Brokerage Analyst.”
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