GEO - The GEO Group Inc. (GEO) - Title 42 Ruling Contract Update
Title 42 Ruling. Last week U.S. District Judge Emmet Sullivan blocked the Federal government from expelling migrant families from the United States under “Title 42.” The order takes effect in 14 days. The government has filed a notice of appeal to the United States Court of Appeals for the District of Columbia Circuit. If upheld, the elimination of Title 42 expulsions could increase demand for GEO beds.Key Points. In a 58-page ruling, Judge Sullivan found that the Title 42 policy does not authorize the expulsion of migrants and therefore does not allow for those removed to be denied the opportunity to seek asylum in the U.S. While the ruling applies to families, many of whom are already being allowed to stay in the U.S., if Title 42 does not authorize the expulsion of families one can see the ruling eventually being applied to single adults.Border Encounters Remain Elevated. Border encounters were nearly 209,000 in August, down slightly from 213,534 in July, but up 318% y-o-y and up 233% from 2019. Fiscal YTD, border encounters are 1,541,651, with one month to go, up 236.5% from full year 2020, and up 57.7% from full year 2019.USMS Contract Renewal. GEO has entered into a six month contract extension with the USMS for the 770 bed Western Region Detention facility. GEO continues to propose alternative contract structures to remain in compliance with the Administration's EO. With a lack of nearby alternatives, we believe there is a good chance an acceptable alternative contract structure will be found.Favorable Risk/Reward. We continue to believe GEO shares represent a favorable risk/reward situation. Although the meme stock crowd continues to impart unusual volatility in GEO shares, we are maintaining our Outperform rating and a $15 per share 12-month price target. While COVID and the political rhetoric remain headwinds, there remain 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 >>