The GEO Group, Inc.

The GEO Group, Inc. (GEO - Snapshot Report) confirmed 2008 guidance in November as demand for correctional facilities stays strong worldwide. The company is both a growth and a value stock. GEO has a PEG ratio of only 0.70.

Company Description

The GEO Group provides correctional, detention and residential treatment services to various government agencies around the world. The company manages and/or owns 67 correctional and residential treatment facilities with a capacity of 64,000 beds in the United States, Australia, South Africa and the United Kingdom.

GEO Surprises on Third Quarter Results by 9.68%

On Nov 3, The GEO Group reported third quarter earnings that beat Wall Street estimates by 3 cents a share. Net income was $17.7 million, or 34 cents per share, compared to $13.8 million, or 27 cents in the third quarter of 2007. Analysts expected 31 cents.

Total revenue was essentially flat year-over-year at $265.4 million compared to $266.1 million in the year ago period. However, revenue, exclusive of pass-through construction revenue, rose 8.2% to $251.9 million from $232.9 million in 2007.

2 of the 3 segments saw gains in the quarter. The U.S. Corrections segment saw revenue increase 11.6% to $189 million from $169.4 million. The International Services segment rose to $34.1 million from $33.5 million in 2007.

GEO Care revenue was the only segment that saw a decline, as revenue fell to $28.8 million from $30 million in the third quarter of 2007. For the first 9 months of 2008, GEO Care revenue was higher at $89.1 million from $79.9 million during the first 9 months of 2007.

Fourth-Quarter 2008 Guidance Confirmed

The company is bullish going forward. It currently has more than 7,500 beds in the pipeline between 2009 and mid-2010, a 14% increase over existing beds under management. GEO confirmed its fourth quarter guidance in the range of 34 to 36 cents per share. Consensus estimates call for 35 cents for the quarter, in the middle of the guidance range.

The full-year 2008 forecast was also confirmed between $1.25 to $1.27. Consensus estimates call for $1.26 per share, also in the middle of the forecast range.

2009 full-year estimates have held at $1.39 in the last 30 days. Analysts expect forward earnings growth of 20%.

Value Fundamentals

The GEO Group is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 3 out of the last 4 quarters by an average of 5.62%.

GEO trades with a forward P/E of 12.87. It has a price-to-book of 1.59. The company also has an outstanding 5-year return on equity of 17.03%.

Read the full analyst report on GEO