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What's in Store for GEO Group (GEO) This Earnings Season?

The GEO Group, Inc. GEO is slated to report fourth-quarter and full-year 2022 earnings on Feb 14, before market open. While the quarterly results are likely to exhibit revenue growth, funds from operations (FFO) per share might reflect a decline.

In the last reported quarter, this Boca Raton, FL-based REIT, specializing in the design, financing, development and delivery of secure facilities for secure facilities, immigration processing centers and community reentry centers, delivered a surprise of 7.14% in terms of adjusted FFO per share.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on each occasion, the average beat being 16.55%. The graph below depicts this surprise history:

Geo Group Inc (The) Price and EPS Surprise

Geo Group Inc (The) Price and EPS Surprise
Geo Group Inc (The) Price and EPS Surprise

Geo Group Inc (The) price-eps-surprise | Geo Group Inc (The) Quote

GEO Group’s fourth-quarter results are likely to have benefited from the improving operating fundamentals of its industry.

The company’s performance during the to-be-reported quarter is expected to have been driven by its Electronic Monitoring and Supervision segment, which is likely to have experienced increases in compensated mandates in the non-residential reentry business and improvements in occupancy rates in the active owned and leased secure facility.

The advantageous locations of GEO’s U.S. Marshals Service near federal courthouses, where suitable alternatives are typically not available, are anticipated to have witnessed stable occupancy levels during the fourth quarter.

Moreover, continuous technological advancements by the company’s BI segment to enhance case management services are likely to have paid off well.

Amid these tailwinds, the company’s top line is expected to have improved. Management projected fourth-quarter 2022 revenues to lie between $600 million and $605 million. The Zacks Consensus Estimate for quarterly revenues is pegged at $605.1 million, suggesting an increase of 8.5% year on year.

For the full year, the company projected revenues to be around $2.36 billion. The Zacks Consensus Estimate matches the same.

In January 2023, GEO’s Australian subsidiary, GEO Australia, entered into a contract with the Department of Justice and Community Safety in the State of Victoria for the delivery of primary health services across 13 public prisons. The contract will commence on Jul 1, 2023, and is expected to generate roughly $33 million in incremental annualized revenue for the company.

In addition, the company’s debt reduction efforts are expected to have helped maintain a robust financial position in the fourth quarter.

However, with respect to the U.S. Immigrations and Customs Enforcement, several of the company’s ICE facilities are likely to have continued to face operational restrictions resulting from the court orders related to the pandemic. In addition, COVID-19-related restrictions under Title 42, which were first enacted in March 2020, continued to be in effect at the Southwest border. This is expected to have affected occupancy levels at the ICE facilities during the quarter under preview.

Also, the non-renewal of the Bureau of Prisons contract for the 1,800-bed North Lake Correctional Facility in Michigan at the end of September 2022 might have been a deterrent.

Furthermore, rising interest rates are likely to have led to higher interest expenses during the quarter.

GEO Group’s activities during the quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unchanged at 55 cents in the past month. The figure implies a decline of 15.4% from the year-ago reported number.

For the full year, the Zacks Consensus Estimate for FFO per share has been unchanged at $2.49 over the past month. The figure, however, indicates marginal growth year over year.

Earnings Whispers

Our proven model does not conclusively predict a surprise in terms of FFO per share for GEO Group this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that is not the case here.

Earnings ESP:  It has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GEO currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Stocks That Warrant a Look

Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

Digital Realty Trust DLR is scheduled to report quarterly figures on Feb 16. DLR has an Earnings ESP of +0.99 % and a Zacks Rank #3 currently.

Life Storage LSI is scheduled to report quarterly figures on Feb 23. LSI has an Earnings ESP of +0.20% and a Zacks Rank of 3 currently.

VICI Properties VICI is scheduled to report quarterly figures on Feb 23. VICI has an Earnings ESP of +0.29% and a Zacks Rank #2 currently.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.

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