Zacks Small Cap Research – CXW: Preview 1Q24 Results; Expect Recent Positive Trends Continue – Technologist

By M. Marin

NYSE:CXW

READ THE FULL CXW RESEARCH REPORT

1Q24 results after market close May 8, 2024 …

CoreCivic (NYSE:CXW) will report 1Q24 results after market close on May 8, 2024 and host a conference call at 10:00 a.m. CT / 11:00 a.m. ET on May 9, 2024. We forecast 1Q24 revenue of $474.2 million compared to $458.0 million in 1Q23, an expected 3.5% year-over-year advance. The consensus estimate is $477.9 million. On the higher projected revenue, we model EPS of $0.12 compared to $0.11 in 1Q23 and consensus of $0.15. Sequentially, 1Q generally is seasonally weaker compared to 4Q because it contains one fewer day and generally reflects higher utilities and unemployment taxes. We believe recent momentum in the company’s business reflect positive trends, including rising average compensated occupancies at CXW facilities and normalizing costs. We are optimistic about operating improvements going forward.

Multiple contracts closed in recent months; talks for new contracts ongoing …

Moreover, CXW is engaged in discussions with multiple government entities. At the same time, renewal rates remain high, reflecting the limited supply of and older state of many government owned correctional facilities, the programs the company offers inmates and the cost effectiveness of its services, among other factors. Over the past 5-years, renewal rates on owned and controlled facilities is 95%.

In our view, the company’s strong pipeline and recent new business wins or contract extensions reflect CXW’s ability to provide flexible capacity to government customers, which is leading to strong pipeline and multiple recent contract signings.

Strengthening balance sheet include recently completed debt issuance to extend maturities

Separately, the company has strengthened its balance sheet significantly since initiating its deleveraging goals in 2020, reducing debt by more than $1.1 billion since then, and recently completed a debt issuance to extend maturities. Demand for CXW’s notes strong and the amount of notes offered was upsized. The company priced an aggregate $500 million principal of 8.25% senior notes due 2029. The aggregate principal amount had been increased from a previously announced $450 million. The proceeds were earmarked to redeem $593.1 million of outstanding 2026 notes, among other uses. We view it as a positive that, even with the uncertain interest rate and economic outlook, CXW has maintained its cost of capital on senior notes at 8.25%. Reflecting its measures, the company has no major debt maturities before 2029 other than some $262 million 4.75% notes maturing in 2027.

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