GEO - The GEO Group Inc. (GEO) - Another Solid Quarter

3Q21 Results. The GEO Group reported better-than-expected top line and AFFO for the third quarter of 2021. Total revenue for the quarter was $557.3 million compared to guidance of $548-$553 million. We were at $553 million. GEO reported AFFO of $0.65/sh, compared to guidance of $0.62/sh -$0.64/sh. We were at $0.65/sh. Adjusted earnings were $0.36/sh versus $0.37/sh last year. We had forecast $0.36/sh.Non-Residential Services Strong Showing. The Non-Residential Services segment, mostly the BI monitoring business, enjoyed a very solid quarter, with revenue up 19% y-o-y (compared to 8.4% YTD) and NOI up 31% in the quarter (compared to 19% YTD).Debt Paydown Continues. In the first nine months GEO reduced net recourse debt by $175 million, including $70 million in 3Q21, meeting the full year goal of $150-$175 million. The Company expects to pay down an additional $10-$20 million this quarter. We estimate end of year net debt to adjusted EBITDAre to be about 4.6x, down from 5.2x at the end of 2020.Updated Projections. As we mentioned last quarter, there was the potential upside to our forecasts and, accordingly, we are modestly raising our fourth quarter estimates based on a better than expected operating environment. We are projecting 4Q21 revenue of $558 million, adjusted EPS of $0.37, and AFFO of $0.66 per share and for the full year revenue of $2.257 billion, adjusted EPS of $1.44, AFFO per share of $2.61, and adjusted EBITDAre of $453 million. Favorable Risk/Reward. We continue to believe GEO shares represent a favorable risk/reward situation. We are maintaining our Outperform rating and a $15 per share 12-month price target. While COVID and the political rhetoric remain headwinds, there are limited alternatives to GEO's services and we believe the Company's real estate assets and high quality contracts eventually will be properly valued. Read More >>