The Trump administration could be a business boon for private prison companies in the US if the president-elect follows through on his promise to crack down on illegal immigration.
CoreCivic and Geo Group, the two largest private prison operators in the US, have both contracted with US Immigration and Customs Enforcement (ICE) to house detained undocumented immigrants. Their shares soared on Wednesday after Trump’s election victory, with investors betting the companies would see higher profits due to a tough immigration administration.
CoreCivic, which closed at $13.50 per share on November 5, is trading at $22 per share, while Geo Group, which closed on Tuesday at $15 per share, is currently trading at $23.75.
“It’s clear that investors believe there will be a significant increase in opportunity for both companies under the Trump administration,” Noble Capital Markets analyst Joe Gomes told CBS MoneyWatch.
Geo Group executives acknowledged Thursday on the company’s third-quarter earnings call that they expect the new administration to implement stricter border security policies and that the company “stands ready to provide additional resources to assist ICE in the future meet needs.”
CoreCivic executives also said they believe the election results will boost demand for its services.
ICE is the largest customer
According to an ACLU report, immigration detention expanded at record levels during Trump’s first term, from 2017-2021. In 2019, ICE detained an average of more than 50,000 people per day. At times, that number exceeded 56,000 — about 50% more than peak levels during the Obama administration, according to the report. During his first term, Trump expanded the federal government’s use of private prison companies to detain immigrants.
According to the ACLU report, in January 2020, 81% of people held in ICE custody in the US were held in facilities owned or operated by private prison companies.
In his second term, newly elected President Trump promises a radical policy change at the US-Mexico border compared to his predecessor. That includes a promise to monitor the largest deportation operation in U.S. history, which could generate significantly more revenue for CoreCivic and Geo Group.
Through the first nine months of 2024, ICE accounted for 30% of each company’s revenue.
Both Geo Group and CoreCivic said they currently have excess capacity to house a larger population of inmates. CoreCivic executives noted that they are taking steps to prepare to activate additional capacity to meet ICE’s needs. That could include reconfiguring facilities to accommodate a larger intake area, they noted.
“There is room for occupancy to increase from a capacity perspective and both companies anticipate a demand from the Trump administration for more beds. The question is how many, and we just don’t know at this point,” said Brian Violino, analyst at Wedbush Securities. CBS Money Watch.
Supervision
Geo Group also provides monitoring services for ICE under its Intensive Supervision Appearance Program (ISAP), a monitoring program that uses wearable technology and serves as an alternative to detention.
“If there are a finite number of beds and a significant number of people being detained, which Trump discusses in his plans, there could be greater use of this alternative to detention,” Violino said.
Geo Group executives said they have the necessary technology and human resources to scale the contract to more than several million participants if necessary.
Congressional funding
The extent to which ICE expands its contracts with the two largest private prison companies depends on how large a funding increase Congress approves. Although Republicans won the Senate majority in Tuesday’s elections, it remains to be seen which party will gain control of the elections US House of Representatives.
“That’s a big part of the story, and if it’s a Republican attack, it will be easier for Trump to get funding from Congress to support this operation that he wants to do,” Violino said.