The GEO Group, Inc. (NYSE:GEO) is one of the best small-cap stocks with huge growth potential. On February 17, Noble Capital cut the price target on The GEO Group, Inc. (NYSE:GEO) to $28 from $35 while maintaining an Outperform rating on the shares. The firm stated that it is lowering its price target to take into account the slower-than-expected growth after the company reported fiscal Q4 results and delivered 2026 guidance. Is The GEO Group, Inc. (GEO) the Best Breakout Stock to Buy According to Analyst ...

Financial Data and Key Metrics Changes - For Q4 2025, the company reported net income of approximately $32 million, or $0.23 per diluted share, on revenues of approximately $708 million, compared to net income of approximately $15.5 million, or $0.11 per diluted share, on revenues of approximately $608 million in Q4 2024 [18][19] - Adjusted EBITDA for Q4 2025 was approximately $126 million, up from approximately $108 million in Q4 2024 [20] - For the full year 2025, net income attributable to GEO operations was approximately $254 million, or $1.82 per diluted share, on revenues of approximately $2.63 billion, compared to $32 million, or $0.22 per diluted share, on revenues of $2.42 billion in 2024 [23][24] Business Line Data and Key Metrics Changes - Owned and leased secure service revenues increased by approximately $70 million, or 23%, in Q4 2025 compared to Q4 2024, primarily driven by new contracts with ICE [20] - Managed-only contracts revenues increased by approximately $26 million, or 17%, due to the joint venture for the North Florida Detention Facility and transportation revenue increases [21] - Revenues for electronic monitoring and supervision services increased by approximately 3%, reflecting a favorable technology and case management mix shift [22] Market Data and Key Metrics Changes - The census across active ICE facilities increased from approximately 22,000 in Q3 to approximately 24,000, the highest level recorded [6] - The current ICE detention census is approximately 70,000, distributed over 225 locations, primarily short-term jail facilities [11] - The company has approximately 6,000 idle beds at six company-owned facilities, which could generate over $300 million in annualized revenues at full capacity [12] Company Strategy and Development Direction - The company aims to capture new growth opportunities that could generate up to $520 million in annualized revenues, marking the most successful period for new business wins in its history [3][32] - The company is exploring participation in the federal government's initiative to purchase and retrofit commercial warehouses for detention capacity, while also focusing on utilizing its idle facilities [13][42] - The company is pursuing additional opportunities in mental health services at the state level, indicating a diversification strategy [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential of the ICE contract, particularly with the increase in monitoring services and case management [9][10] - The company expects 2026 to be as active as 2025, with potential upside across diversified business segments [32] - Management acknowledged the impact of government funding processes on operations but indicated strong liquidity and support from lenders [14][29] Other Important Information - The company completed the sale of the Lawton, Oklahoma facility for $312 million and the Hector Garza facility for $10 million, resulting in a significant pre-tax gain [24][30] - A share repurchase program was initiated in August 2025, with approximately 5 million shares repurchased for about $91 million by year-end 2025 [16][30] - The company closed 2025 with approximately $70 million in cash and approximately $1.65 billion in total debt [28] Q&A Session Summary Question: Regarding ICE's focus on warehouse initiatives and contract delays - Management indicated that ICE is pursuing both warehouse initiatives and utilizing existing private sector bed capacity, estimating a need for at least 20,000 new beds to reach a target of 100,000 [40][41] Question: On ISAP contract participant levels and capacity - Management confirmed readiness to scale monitoring devices and case management services to meet increased participant levels as outlined in the new ISAP contract [44] Question: Stock buyback strategy given current stock price - Management acknowledged the potential for more aggressive buybacks at current stock levels, emphasizing a diligent approach to capital allocation [46][47] Question: Monitoring service margins and mix shifts - Management explained that margin compression is primarily due to a shift in service mix, with increased demand for higher-cost ankle monitors impacting overall margins [51][52] Question: Guidance for 2026 and startup expenses - Management provided insights into conservative guidance for 2026, factoring in startup expenses related to activating idle facilities, with expectations for margin normalization in the latter half of the year [70][71]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported net income of approximately $32 million, or $0.23 per diluted share, on revenues of approximately $708 million, compared to net income of approximately $15.5 million, or $0.11 per diluted share, on revenues of approximately $608 million in Q4 2024 [18] - Adjusted EBITDA for Q4 2025 was approximately $126 million, up from approximately $108 million in Q4 2024 [19] - For the full year 2025, net income attributable to GEO operations was approximately $254 million, or $1.82 per diluted share, on revenues of approximately $2.63 billion, compared to $32 million, or $0.22 per diluted share, on revenues of $2.42 billion in 2024 [23] Business Line Data and Key Metrics Changes - Owned and leased secure service revenues increased by approximately $70 million, or 23%, in Q4 2025 compared to Q4 2024, primarily driven by the activation of new company-owned facilities [19] - Managed-only contracts revenues increased by approximately $26 million, or 17%, driven by the joint venture agreement for the North Florida Detention Facility [20] - Revenues for electronic monitoring and supervision services increased by approximately 3% from the prior year's fourth quarter, reflecting a favorable technology and case management mix shift [21] Market Data and Key Metrics Changes - The census across active ICE facilities increased from approximately 22,000 in Q3 to approximately 24,000, the highest level of ICE populations recorded [5] - The current ICE detention census is approximately 70,000, distributed over 225 separate locations, primarily short-term jail facilities [10] - The company has approximately 6,000 idle beds at six company-owned facilities, which could generate over $300 million in annualized revenues at full capacity [11] Company Strategy and Development Direction - The company has been awarded new or expanded contracts representing approximately $520 million in new incremental annualized revenues, marking the largest amount of new business won in a single year in its history [3] - The company is exploring opportunities in the field of mental health services and is participating in a procurement for the management contract at a state forensic psychiatric hospital [15] - The company is cautiously participating in the federal government's procurement process for retrofitting commercial warehouses to increase detention capacity [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential of the ICE contract, particularly with the increase in more intensive monitoring devices and case management services [8] - The company expects 2026 to be as active as 2025, with upside potential across diversified business segments [33] - Management noted that the federal government is focused on increasing immigration detention capacity and is looking for solutions to upscale to 100,000 beds or more [11] Other Important Information - The company completed the sale of the Lawton, Oklahoma facility for $312 million and the Hector Garza facility for $10 million, resulting in a $232 million pre-tax gain on asset sales [24] - The company initiated a share repurchase program in August 2025, expanding it to $500 million in November, with approximately 5 million shares repurchased for approximately $91 million by year-end 2025 [16] - The company closed 2025 with approximately $70 million in cash and approximately $1.65 billion in total debt [28] Q&A Session Summary Question: Regarding ICE's focus on warehouse initiatives and contract delays - Management indicated that ICE is pursuing both warehouse initiatives and utilizing existing private sector bed capacity, estimating a need for at least 20,000 new beds to reach a target of 100,000 [42][44] Question: On ISAP contract participation levels - Management confirmed that they are prepared to scale up monitoring devices and case management services to meet increased participation levels as requested by ICE [46] Question: Stock buyback strategy given low stock price - Management acknowledged the opportunity to be more aggressive with stock buybacks at current levels and emphasized their commitment to managing liquidity while taking advantage of the buyback program [47][48] Question: Monitoring service margins and mix shift - Management explained that margin compression is primarily due to a mix shift towards higher-cost ankle monitors and increased case management services [52][53] Question: Guidance for fiscal 2026 and startup expenses - Management stated that they are incorporating startup expenses related to the activation of idle facilities into their guidance, which is designed to be prudent and balanced [68][69]

Group 1 - The GEO Group, Inc. (NYSE:GEO) is highlighted as a potential investment opportunity that could yield significant returns by 2026 [1] - Recently, the company was mentioned in a letter to inspectors general from lawmakers expressing concerns about immigration contractors receiving no-bid contracts due to connections with Trump administration officials [2] - In Q3 earnings, GEO reported earnings per share of $0.25, exceeding estimates by $0.02, and revenue of $682.34 million, which is a 13.1% year-on-year increase, surpassing expectations by $16.53 million [3] Group 2 - The GEO Group operates secure facilities, processing centers, and community-based reentry facilities across the United States, Australia, the United Kingdom, and South Africa [3]

Core Insights - The GEO Group, a publicly traded prison stock, was identified as having transitioned from being undervalued to fully priced since the industry's low point in 2021 [1] Company Analysis - The GEO Group was one of two prison stocks purchased during a low point in the industry, indicating a strategic investment decision based on market conditions [1]

Financial Data and Key Metrics Changes - Total revenue increased by 9.8% from 2024 to 2025, with adjusted EBITDA rising to $103.3 million, up $19.5 million or 23.2% from the prior year quarter [11][42] - GAAP EPS for 2025 was $0.35, while adjusted EPS increased to $0.36, up 80% from $0.20 in 2024 [41][46] - Normalized FFO per share was $0.59, an increase of 40.5% from $0.42 in the prior year quarter [41][46] Business Line Data and Key Metrics Changes - Revenue from federal partners, primarily ICE and the U.S. Marshals Service, increased by 11% in 2025 compared to the prior year quarter [28][30] - Revenue from ICE specifically rose by $25.9 million or 17%, while revenue from the U.S. Marshals Service increased by $2.7 million or 3% [29][30] - Revenue from state partners increased by $9.9 million or 5%, driven by new contracts with the State of Montana [30] Market Data and Key Metrics Changes - Nationwide ICE detention populations reached a record high of 57,861 in June 2025, with a 28% increase in populations under the company's care [8][10] - Year-over-year state populations increased by approximately 3.5%, primarily due to new contracts with the State of Montana [10] Company Strategy and Development Direction - The company is focused on capitalizing on government funding initiatives, particularly the One Big Beautiful Bill Act, which appropriates $75 billion for immigration enforcement and detention capacity [9][18] - The company is in advanced negotiations to activate additional idle facilities and has begun discussions for a fifth idle facility [39][49] - The company aims to meet the increasing demand for detention capacity driven by federal funding and operational needs [22][25] Management's Comments on Operating Environment and Future Outlook - Management noted an unprecedented environment with rising federal detention populations and a continuing need for their services [7][8] - The company expects increased contracting activity and demand for detention solutions due to the passage of the One Big Beautiful Bill Act [22][23] - Management expressed optimism about securing additional contracts and activating idle facilities, especially with historic funding levels now available [49][50] Other Important Information - The company repurchased 2 million shares at a cost of $43.2 million during the second quarter, increasing total repurchases for the year to 3.9 million shares [11][45] - The acquisition of the Farmville Detention Center for $67 million was completed on July 1, 2025, which is expected to be accretive to earnings [11][46] Q&A Session Summary Question: Can you discuss the impact of alternative solutions like soft-sided facilities on your business? - Management indicated that the intensity of contracting activity has increased following the passage of the One Big Beautiful Bill Act, and they are actively engaged in discussions with ICE regarding various facility solutions [58][60] Question: How many people are currently in the non-detained docket? - Management highlighted that there are approximately 7.5 million individuals in immigration proceedings, with a focus on deportations [61][62] Question: Is the company interested in the ISAP contract renewal? - Management stated that detention remains a priority for ICE, and they are prepared to engage in opportunities related to the ISAP contract [74]