Bullish On Corrections Corp. (NYSE: CXW)

By: Zacks Investment Research Monday, May 11, 2009 11:31 AM

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We highlight Corrections Corporation of America (CXW), Cornell Companies (CRN) and The Geo Group (GEO).

Strong Week for Corrections Corp.

Shares of Buy-rated Corrections Corporation of America (CXW) were up more than 25% last week.

Late last week, the company reported quarterly earnings that exceeded our expectation, and raised its full-year earnings guidance.

We continue to believe that the private-prison industry in the United States holds significant growth potential, and as the largest company in the industry, we consider CXW to be well-positioned to capitalize on growth going forward.

The detention and corrections industry in the United States comprises a $65 billion market. Presently, only 7.9% of detention and corrections facility beds in the country are outsourced to private companies. The trend in outsourcing has increased substantially in recent years, however. In 1990, privatized beds in the US system totaled fewer than 11,000. Today, privatized beds number more than 185,000, equating to a compound annual growth rate of approximately 17%.

CXW controls approximately 46% of the private prison and jail beds in the U.S., significantly more than competitors such as Cornell Companies (CRN) and The Geo Group (GEO). With this level of market share, we believe that the company is poised to win additional contracts as federal and state needs continue to increase.

Although state budgets are currently constrained -- with significant uncertainty regarding future funding -- the fact remains that prisons and detention centers are overcrowded, and the private prison industry offers states and federal agencies a viable solution.

CXW's business model offers a relatively high level of visibility, with long-term contracts with its state and federal customers. In light of the large amount of uncertainty in the broad market presently, we view this level of visibility favorably.

Additionally, we note that the company generates significantly more free cash flow than GAAP net earnings, due in part to its high levels of property depreciation. For example, in fiscal 2008, net income was $1.21 per share, while adjusted free cash flow was $2.03 per share. Net income from continuing operations grew 14.4% year-over-year in fiscal 2008, while adjusted free cash flow grew by 24.2% during the same period.

Given our favorable outlook, we rate the shares a Buy with price target of $21.00 per share.

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5/12/2009 9:43:22 AM Abolish All Private "for profit" Prisons In America by William A “SINGLE VOICE PROJECT” is the official name of the petition sponsored by: The National Public Service Council To Abolish Private Prisons (NPSCTAPP) THIS PETITION SEEKS TO ABOLISH ALL PRIVATE PRISONS IN THE UNITED STATES, (or any place subject to its jurisdiction) The National Public Service Council To Abolish Private Prisons (NPSCTAPP) is a grass roots organization driven by a single objective. We want the United States government to reclaim sole authority for state and federal prisons on US soil. We want the United States Congress to immediately rescind all state and federal contracts that permit private prisons “for profit” to exist in the United States, or any place subject to its jurisdiction. We understand that the problems that currently plague our government, its criminal justice system and in particular, the state & federal bureau of prisons (and most correctional and rehabilitation facilities) are massive. However, it is our solemn belief that the solutions for prison reform will remain unattainable and virtually impossible as long as private prisons for profit are permitted to operate in America. Prior to the past month, and the fiasco of Fannie Mae, Freddie Mac, AIG, Lehman Brothers, and now the “Big Three” American Automobile manufacturers, the NPSCTAPP has always felt compelled to highlight the “moral Bottom line” when it comes to corrections and privatization. Although, we remain confounded by the reality that our government has allowed our justice system to be operated by private interests. The NPSCTAPP philosophy has always been “justice” should not be for sale at any price. It is our belief that the inherent and most fundamental responsibility of the criminal justice system should not be shirked, or “jobbed-out.” This is not the same as privatizing the post office or some trash pick up service in the community. There has to be a loss of meaning and purpose when an inmate looks at a guard’s uniform and instead of seeing an emblem that reads State Department of Corrections or Federal Bureau of Prisons, he sees one that says: “Atlas Prison Corporation.” Let’s assume that the real danger of privatization is not some innate inhumanity on the part of its practitioners but rather the added financial incentives that reward inhumanity. The same logic that motivates companies to operate prisons more efficiently also encourages them to cut corners at the expense of workers, prisoners and the public. Every penny they do not spend on food, medical care or training for guards is a dime they can pocket. What happens when the pennies pocketed are not enough for the shareholders? Who will bailout the private prison industry when they hold the government and the American people hostage with the threat of financial failure…“bankruptcy?” What was unimaginable a month ago merits serious consideration today. State and Federal prison programs originate from government design, and therefore, need to be maintained by the government. It’s time to restore the principles and the vacated promise of our judicial system. John F. Kennedy said, “The time to repair the roof is while the sun is shinning”. Well the sun may not be shinning but, it’s not a bad time to begin repair on a dangerous roof that is certain to fall…. because, “Incarcerating people for profit is, in a word WRONG” There is an urgent need for the good people of this country to emerge from the shadows of cynicism, indifference, apathy and those other dark places that we migrate to when we are overwhelmed by frustration and the loss of hope. It is our hope that you will support the NPSCTAPP with a show of solidarity by signing our petition. We intend to assemble a collection of one million signatures, which will subsequently be attached to a proposition for consideration. This proposition will be presented to both, the Speaker Of The House Of Representatives (Nancy Pelosi) and the United States Congress. Please Help Us. We Need Your Support. Help Us Spread The Word About This Monumental And Courageous Challenge To Create Positive Change. Place The Link To The Petition On Your Website! Pass It On! The SINGLE VOICE PETITION and the effort to abolish private “for profit” prisons is the sole intent of NPSCTAPP. Our project does not contain any additional agendas. We have no solutions or suggestions regarding prison reform. However, we are unyielding in our belief that the answers to the many problems which currently plague this nation’s criminal justice system and its penal system in particular, cannot and will not be found within or assisted by the private “for profit” prison business. The private “for profit” prison business has a stranglehold on our criminal justice system. Its vice-like grip continues to choke the possibility of justice, fairness, and responsibility from both state and federal systems. These new slave plantations are not the answer! For more information please visit: http://www.npsctapp.blogspot.com or email: williamthomas@exconciliation.com To sign the petition please visit: http://www.petitiononline.com/gufree2/petition.html THANK YOU FOR YOUR SUPPORT! William Thomas National Community Outreach Facilitator The National Public Service Council To Abolish Private Prisons P.O. Box 156423 San Francisco, California 94115 Reply Rating: (1) (0)

A “SINGLE VOICE PROJECT” is the official name of the petition sponsored by: The National Public Service Council To Abolish Private Prisons (NPSCTAPP)

THIS PETITION SEEKS TO ABOLISH ALL PRIVATE PRISONS IN THE UNITED STATES, (or any place subject to its jurisdiction)

The National Public Service Council To Abolish Private Prisons (NPSCTAPP) is a grass roots organization driven by a single objective. We want the United States government to reclaim sole authority for state and federal prisons on US soil.
We want the United States Congress to immediately rescind all state and federal contracts that permit private prisons “for profit” to exist in the United States, or any place subject to its jurisdiction. We understand that the problems that currently plague our government, its criminal justice system and in particular, the state & federal bureau of prisons (and most correctional and rehabilitation facilities) are massive. However, it is our solemn belief that the solutions for prison reform will remain unattainable and virtually impossible as long as private prisons for profit are permitted to operate in America.

Prior to the past month, and the fiasco of Fannie Mae, Freddie Mac, AIG, Lehman Brothers, and now the “Big Three” American Automobile manufacturers, the NPSCTAPP has always felt compelled to highlight the “moral Bottom line” when it comes to corrections and privatization. Although, we remain confounded by the reality that our government has allowed our justice system to be operated by private interests. The NPSCTAPP philosophy has always been “justice” should not be for sale at any price. It is our belief that the inherent and most fundamental responsibility of the criminal justice system should not be shirked, or “jobbed-out.” This is not the same as privatizing the post office or some trash pick up service in the community. There has to be a loss of meaning and purpose when an inmate looks at a guard’s uniform and instead of seeing an emblem that reads State Department of Corrections or Federal Bureau of Prisons, he sees one that says: “Atlas Prison Corporation.”

Let’s assume that the real danger of privatization is not some innate inhumanity on the part of its practitioners but rather the added financial incentives that reward inhumanity. The same logic that motivates companies to operate prisons more efficiently also encourages them to cut corners at the expense of workers, prisoners and the public. Every penny they do not spend on food, medical care or training for guards is a dime they can pocket. What happens when the pennies pocketed are not enough for the shareholders? Who will bailout the private prison industry when they hold the government and the American people hostage with the threat of financial failure…“bankruptcy?” What was unimaginable a month ago merits serious consideration today. State and Federal prison programs originate from government design, and therefore, need to be maintained by the government. It’s time to restore the principles and the vacated promise of our judicial system.

John F. Kennedy said, “The time to repair the roof is while the sun is shinning”. Well the sun may not be shinning but, it’s not a bad time to begin repair on a dangerous roof that is certain to fall…. because, “Incarcerating people for profit is, in a word WRONG”

There is an urgent need for the good people of this country to emerge from the shadows of cynicism, indifference, apathy and those other dark places that we migrate to when we are overwhelmed by frustration and the loss of hope.
It is our hope that you will support the NPSCTAPP with a show of solidarity by signing our petition. We intend to assemble a collection of one million signatures, which will subsequently be attached to a proposition for consideration. This proposition will be presented to both, the Speaker Of The House Of Representatives (Nancy Pelosi) and the United States Congress.

Please Help Us. We Need Your Support. Help Us Spread The Word About This Monumental And Courageous Challenge To Create Positive Change. Place The Link To The Petition On Your Website! Pass It On!

The SINGLE VOICE PETITION and the effort to abolish private “for profit” prisons is the sole intent of NPSCTAPP. Our project does not contain any additional agendas. We have no solutions or suggestions regarding prison reform. However, we are unyielding in our belief that the answers to the many problems which currently plague this nation’s criminal justice system and its penal system in particular, cannot and will not be found within or assisted by the private “for profit” prison business. The private “for profit” prison business has a stranglehold on our criminal justice system. Its vice-like grip continues to choke the possibility of justice, fairness, and responsibility from both state and federal systems.
These new slave plantations are not the answer!

For more information please visit: http://www.npsctapp.blogspot.com or email: williamthomas@exconciliation.com
To sign the petition please visit: http://www.petitiononline.com/gufree2/petition.html

THANK YOU FOR YOUR SUPPORT!

William Thomas
National Community Outreach Facilitator
The National Public Service Council To Abolish Private Prisons
P.O. Box 156423
San Francisco, California 94115

Rating: (1) (0)

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Strong Week for Corrections Corp.

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