Trump Administration: A Potential Business Boost for US Private Prison Companies

The Trump administration’s tough stance on illegal immigration could potentially be a windfall for US private prison operators. Companies such as CoreCivic and Geo Group, the two biggest private prison operators in the U.S., are expected to benefit if the anticipated crackdown on illegal immigration by the incoming administration materializes.

Private prison stocks surge post-election

In the aftermath of Trump’s election win, stocks for CoreCivic and Geo Group surged. Both companies contract with the U.S. Immigration and Customs Enforcement (ICE) to house detained, undocumented migrants. Investors are betting on increased profits with a stricter immigration policy, with CoreCivic trading at $22 a share from $13.50 before the election, and Geo Group trading at $23.75 up from $15 a share.

Analysts predict growth for private prisons

According to market analysts like Joe Gomes from Noble Capital Markets, investors are expecting a significant increase in opportunities for both firms under the Trump administration. Similarly, Geo Group executives have mentioned in their third-quarter earnings call that they foresee stricter border security policies from the incoming administration and stand ready to provide additional resources to help ICE meet future needs.

Increased demand for private prison services

CoreCivic executives also believe that the election result will drive more demand for its services. During Trump’s first term from 2017-2021, immigration detention increased at record levels, according to an ACLU report. In 2019, ICE detained an average of over 50,000 people each day. By January 2020, 81% of people detained in ICE custody across the U.S. were held in facilities owned or managed by private prison corporations, the report further detailed.

Trump’s radical shift in policy at the U.S.-Mexico border

In his second term, President-elect Trump promises a radical shift in policy at the U.S.-Mexico border from his predecessor, including overseeing the largest deportation operation in American history. Such a move could bring significantly more business to CoreCivic and Geo Group. For the first nine months of 2024, ICE accounted for 30% of each company’s revenue.

Preparing for a larger detainee population

Both Geo Group and CoreCivic have said that they currently have excess capacity to accommodate a larger population of detainees. CoreCivic executives mentioned that they’re taking steps to prepare to activate additional capacity to meet ICE’s needs, which could include reconfiguring facilities to accommodate a larger intake area.

Geo Group’s monitoring services for ICE

Geo Group also provides monitoring services for ICE under its Intensive Supervision Appearance Program (ISAP), a monitoring program using wearable technology that serves as an alternative to detention. Executives have stated that they have the necessary technology and staffing resources to scale up the contract to more than several million participants, if necessary.

Funding from Congress for ICE expansion

The degree to which ICE expands its contracts with the two largest private prison companies depends on the level of increase in funding Congress authorizes. It remains to be seen which party will obtain control of the U.S. House of Representatives. If the Republicans hold majority, it could make it easier for Trump to secure funding from Congress to support his migration policies.