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Factors to Impact The GEO Group (GEO) This Earnings Season

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The GEO Group, Inc. (GEO - Free Report) is slated to report second-quarter 2021 earnings on Aug 4, before market open. Both its quarterly revenues and funds from operations (FFO) per share will likely display year-over-year declines.

In the last reported quarter, this Boca Raton, FL-based REIT, specializing in the design, financing, development, and operation of secure facilities, processing centers, and community reentry centers, delivered a surprise of 25% 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 18.09%. 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-eps-surprise | Geo Group Inc The Quote

Let’s see how things have shaped up prior to this announcement.

Factors to Consider

In January 2021, President Joe Biden signed an executive order directing the United States Attorney General not to renew the U.S. Department of Justice contracts with privately-operated criminal detention facilities. These federal policy actions have resulted in the non-renewal of some of the company’s contracts.

As a result, the company is expected to have faced revenue headwinds in the second quarter. Revenues from the Bureau of Prisons (BOP) and U.S. Marshals Service (USMS) might have been affected. Moreover, amid the executive order and the pandemic, occupancy rates are expected to have been lower.

Management projects second-quarter revenues to be in the range of $558-$563 million, and adjusted FFO per share in the band of 57 to 59 cents. It noted that the second-quarter results usually reflect lower payroll tax expenses than the first-quarter numbers, as payroll taxes are front-loaded, inflating expenses during the first quarter of each year as compared to the succeeding quarters.

The Zacks Consensus Estimate of $561.18 million for quarterly revenues suggests a 4.5% decrease year on year.

The GEO Group’s activities during the quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised marginally south to 58 cents in two months’ time. It also calls for a 12.1% year-over-year decline.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for The GEO Group this season. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The GEO Group currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of -1.72%.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report surprises this quarter:

Healthcare Trust of America, Inc. , scheduled to report quarterly numbers on Aug 5, currently has an Earnings ESP of +1.89% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Park Hotels & Resorts Inc. (PK - Free Report) , slated to release second-quarter numbers on Aug 5, has an Earnings ESP of +19.33% and carries a Zacks Rank of 3, at present.

OUTFRONT Media Inc. (OUT - Free Report) , set to announce quarterly results on Aug 5, currently has an Earnings ESP of +14.29% and carries a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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