Geo Group (GEO) and CoreCivic (CXW) made huge moves this week amid earnings and elections. The previous Trump stock winners broke out to highs and are now on track for one of their best months since November 2016.
Private prison stocks Geo Group and CoreCivic skyrocketed after Donald Trump, who has promised a mass deportation of illegal immigrants, won a second presidential term. Investors seemed to bet — again – that a Trump-led White House would detain more undocumented migrants in the company’s facilities.
The president-elect vowed during his acceptance speech on Tuesday: “Promises made, promises kept.”
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Shares of Geo Group and CoreCivic both rose in choppy trade in Friday’s stock market.
CoreCivic stock scored a 29% earnings breakaway gap on Wednesday. It jumped above a 16.54 buy point in the biggest volume since shares began to consolidate in June, MarketSurge shows. The prison stock soared nearly 88% this week before paring the weekly gain to 72%, though that was enough to put it well into the profit-taking sell zone as of Friday.
On Wednesday, Geo Group stock also broke out in sympathy. Geo stock extended gains from the 16.47 cup-with-handle entry amid earnings on Thursday. It has soared almost 78% for the week and is similarly ensconced in profit-taking territory on Friday.
When stocks race into the profit-taking zone within two or three weeks, it’s a good idea to try to hold such stocks for at least eight weeks. Geo and CoreCivic did so in one or two days.
Earlier this week, prison and detention operators GEO Group and CoreCivic diverged on outlook after reporting strong third-quarter earnings.
CoreCivic on Wednesday hiked its full-year 2024 guidance for adjusted funds from operations per share for 2024 to $1.59-$1.65 — from $1.48-$1.56 — after Q3 occupancy grew to 75% from 72%. Analysts expected adjusted funds from operations of $1.49 a share, according to FactSet.
Geo Group on Thursday said it is now targeting full-year 2024 adjusted EBITDA of $470 million-$480 million, down from $485 million-$505 million previously. Analysts expect $488 million, FactSet shows.
In 2016, private prison stocks galloped ahead after Trump’s first presidential election win.
Geo Group, which owns, leases and manages correctional facilities, advanced 107% in the three months after the election. Rival CoreCivic rose 149% in the same three-month period.
Many investors credited Trump’s win for the initial rally in the prison stocks. Trump vowed to crack down on crime and illegal immigration, and private prisons and detention centers were seemingly one answer to overcrowding.
This was a sharp reversal from former President Barack Obama’s order to phase out private prisons. In February 2017, then Attorney General Jeff Sessions turned the green light back on for private prisons.
Much has changed since then. The two main prison stocks quickly saw gains from the first Trump victory evaporate.
Both Geo stock and CoreCivic languished for much of the past year before breaking out to highs this week amid the elections and earnings.
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