By M. Marin
READ THE FULL CXW RESEARCH REPORT
Occupancy continues to rise, with significant upside expected
CoreCivic (NYSE:CXW) reported 2Q25 results last week, beating our projections and raising 2025 guidance. Total revenue of $538.2 million was well ahead of our $507.5 million forecast, reflecting new contracts and higher occupancy and per diems. This represents a 9.8% year-over-year increase compared to revenue of $490.1 million reported in 2Q24. Two important contracts had expired in 2024, but CXW has already renegotiated and/or secured agreement on these. In addition, new contracts have come online over the past several quarters with state, counties, and the U.S. Marshals Service, as well as ICE.
The company recorded 2Q25 adjusted EPS of $0.36, significantly ahead of our $0.22 adjusted EPS forecast and consensus of $0.21. The increase primarily reflected higher federal and state populations and higher average per diem rates at many locations, noted above, and operating leverage and cost efficiencies. In addition, employee retention credits (ERCs) added $0.08/share.
Reactivating idled facilities & adding capacity via M&A to meet growing ICE need for capacity
CXW is in the process of reactivating idled facilities, as noted, and is in discussions to reactivate other sites.
- In March, the company started reactivating a facility operated previously in Dilley, Texas. Following expiration of an earlier contract, CXW entered into an amended intergovernmental services agreement (IGSA) with ICE and the City of Dilley, Texas, to resume operations at the South Texas Family Residential Center in Dilley and care for up to 2,400 people. The amended contract runs through March 2030 and may be further extended. The company has also entered into a new lease agreement with Target Hospitality Corporation, which owns the facility. The agreement is expected to contribute about $180 million in annual revenue to CXW once it is completely active.
- The company entered into a Letter Contract with ICE effective April 1, 2025, to reactivate the 2,560-bed California City Immigration Processing Center. Initial funding authorized is $10.0 million to $31.2 million for a six-month period to help cover start-up costs as CXW and ICE negotiate a long-term contract.
- The company entered into a Letter Contract with ICE effective March 7, 2025, to reactivate the 1,033-bed Midwest Regional Reception Center, with initial funding of up to $5.0 million to $22.6 million for a six-month period to help cover start-up costs while CXW and ICE negotiate a long-term contract. Activities have been paused by a lawsuit the City of Leavenworth filed alleging that a Special Use Permit (SUP) is required to operate the facility. As the legal process to resolve this proceeds, CXW remains confident that ICE intends to continue using this facility.
The company is also in discussion to reactivate other idled facilities. Compensated occupancy in 2Q25 increased to 76.8%, up from 74.3% in 2Q24. Prior to the pandemic, this metric reached the high 80s and even into the 90s percent. Moreover, reflecting ICE’s recent funding, CXW has noted that discussions with ICE indicate that CXW needs considerably more capacity that likely takes CXW occupancies much higher.
CXW also acquired the Farmville Detention Center in Farmville, Virginia, to further expand capacity. Farmville has a 736-bed capacity and provides transportation, care, and civil detention services to adult male detainees through a contract between Prince Edward County, Virginia, and ICE that expires in March 2029. Farmville is expected to produce total annual incremental revenue of about $40.0 million.
Alternative solutions such as Alligator Alcatraz likely do not detract from CXW growing its ICE business and could even imply some potential opportunity for the company
CXW’s expansion initiatives underscore CXW’s need for capacity, reflecting discussions with ICE, its largest government partner and, according to the New York Times, the federal government’s highest funded law enforcement agency. ICE is seeking to expand its nationwide capacity. While alternative solutions such as Alligator Alcatraz in Florida are being considered, CXW believes such solutions do not detract from it growing its ICE business and could even imply some potential opportunity to manage alternative solutions or facilities. The company has a long history of providing capacity and related services to ICE and other government partners. Reflecting the additional capacity required by ICE and potentially other government partners, we anticipate discussions to lead to new business and expect the company’s momentum to continue.
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