CoreCivic to Offer Look Inside Its Walls

 | Aug 07, 2017 | 10:00 AM EDT
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While I have never been a fan of earnings season due to the laser-like attention it focuses on a single quarter's results, as if every quarter is make or break for every company, I still find it mildly exciting. Progress reports are important, especially for companies that have little in the way of analyst coverage or otherwise don't generate a great deal of attention.

However, the report today that I am anxiously awaiting has generated a significant amount of press, and not usually positive. Leading private corrections name CoreCivic Inc. (CXW) , formerly known as Corrections Corp. of America, is due to report second-quarter results today.

Privately run prisons have been controversial at best, and this company has been bashed by a press that has not been shy about pointing out every single flaw or wart. One of the more recent stories, from late June, reports that the company agreed to pay medical bills for employees at a Nashville-area prison following a scabies outbreak. That's a "feel-good" story in the realm of press coverage for CXW.

The company does indeed have a long and storied history, and the past year has added yet another strange chapter. But interestingly, shares trade at nearly the same level as a year ago; if it weren't for the $1.80 in dividends paid over the past year, there would be no return during that period. It's what happened within those 12 months that generated some great returns for investors who had strong enough stomachs (or some might say were foolish enough) to take a risk.

The short version is that the share price was halved between mid-August and early October last year, after the U.S. Department of Justice's Bureau of Prisons indicated that it would phase out doing business with private prison operators. Hillary Clinton's presumed election did not help the stock, given her staunch stance against private prison. The surprising presidential election of a seemingly pro-private prison administration sent CoreCivic shares from $14 on the eve of the election to $20 the next day, and ultimately as high as $35 by late February. Since then, shares have given back 20%. If you did not know any better and simply compared the year-ago price and the current price, you easily could conclude it was a very boring year for CXW.

Today, after the market closes, we'll get another glimpse of CoreCivic's progress, or the lack thereof. Since the company is a real estate investment trust (REIT), distributions play a vital role in valuation. Currently paying 42-cent quarterly dividends and yielding 6.2%,CoreCivic was forced to cut the dividend last year from 54 cents. That was not a surprise at the time, but ultimately rising distributions will be a key to propel the stock higher.

The current consensus of just three analysts calls for revenue of $439 million and earnings per share of 36 cents. Since this is a REIT, however, the most important number to watch is funds from operations (FFO). The most recent estimate I saw for FFO was 57 cents a share.

Last quarter, the company reported in-line revenue but beat FFO estimates by four cents a share (63 cents versus the 59-cent consensus). This will be the company's second full quarter under an administration that is friendlier to private corrections. It may be too early to tell whether there will be any fruit for the company from this environment, but today we'll get a progress report nonetheless.

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