GEO - The GEO Group Inc. (GEO) - Contract Aging: A Deeper Dive

A Deeper Dive. We took a deeper dive into GEO's ability to repay its debt. We believe the Company is positioned to handle its debt under nearly any circumstance. Although the executive orders have increased uncertainty around GEO's business, we continue to believe, for a number of reasons, that the USMS issues will ultimately be resolved in a manner that the Company can live with. While the loss of the BoP business will hurt, it is not fatal, in our view.A Stable Business. In spite of the year-in and year-out changes to its business, including the loss of customers in the past, GEO generates a remarkably stable level of cash flows. We believe the long-term nature of many of its contracts help isolate the Company from a massive run-off of business in a short period of time.A Critical Business. GEO provides a critical service to its government partners enabling them to accomplish their missions in a cost effective manner. As we have mentioned before, the USMS does not own any beds to house its detainees. There just isn't thousands of such beds available and it would take years to build out such capacity. And with approximately one-third of all prison beds located in facilities past or at the end of their useful life, GEO's ability to provide modern, cost effective facilities becomes even more important.Favorable Risk/Reward. We are maintaining our Outperform rating and a $15 per share 12-month price target as GEO shares present a favorable risk/reward opportunity in our view. While COVID and the political rhetoric remain headwinds, we believe the Company's real estate assets and high quality contracts eventually will be properly valued.Read More >>