back to 20.0% from 18.5%, where it had reigned for 15 weeks (from the week-ending 8/13/04 through 11/19/04).
Is the restoration of a higher CAGR along with CXW's progress in building the right side of its c-w-h just a coincidence? Or are the expected improved fundamentals a confirmation of what the technicals have been forecasting?
Thanks, General, et al. Very interesting posts.
I note that existing prisons were built some time ago at costs which are significantly below current replacement costs. (I know, the gov says inflation is very low -- but, I think the price of Red Sox tickets may be a better indicator.)
Then, during the "bad" period, even these lower costs were written down on the books.
Therefor, even what looks like better returns on assets of late are, in fact, woefully inadequate. So, I think the prices we charge must climb quite a bit before we will see any significant expansion of beds.
So for, we have seen mostly de-mothballing or expansions to existing facilities. Brand new prisons, I think are a whole other story.
The fact that CRN has high capital costs can only help us in this regard.
If we do get (as I expect) these general price increases in prison rates, then we will truly be "back in the saddle again" as a former baseball man might say!
I think it is close to happening.
A CELTICS fan.
Cornell is in the middle of a really nasty battle with one its shareholders. Over 1/3 of its shareholders refused to vote for the current board at the last shareholders' meeting, and this was without a campaign to do so. One of their biggest shareholders, Pirate Capital (or Pirate something, what a name!) tod their CEO on the last conference call that they'd be around a year from now, but he wouldn't.
The General, in completing his weekend ritual of summarizing the week's stats for the issues on his monitor list, noted how poorly the industry's #3 company, CRN, (which is on the list ��not a holding) has been doing compared with CXW (the General doesn't monitor Wackenhut Corrections).
Here are some comparative parameters since the beginning of 2004:
FY04's Consensus EPS
CRN: $0.91 ��> $0.50 (-45.05%)
CXW: $1.55 ��> $1.56 (+0.65%)
FY05's Consensus EPS
CRN: $1.30 ��> $0.91 (-30.00%)
CXW: $1.92 ��> $1.85 (-3.65%)
Consensus 5-Year EPS's CAGR
CRN: 15.0% ��> 12.0% (-20.00%)
CXW: 15.0% ��> 18.5%� (+23.33%)
� Just lowered back down to 18.5% after an 8-week run @ 20.0%.
CRN: $13.75 ��> $12.37 (-10.04%)
CXW: $29.38 ��> $34.41 (+17.12%)
� Closing price on 1/02/04.
Princess, it may interest you to know that the people you refer to as << with the exception of some folks on this board :-) >> all happen to be either Cubs or Red Sox fans.
If CXW has reported an occupancy for 2Q04 of 95.8%, that doesn't leave a great many unfilled ones of those currently available. We're talkin' in the order of 2,500 +/-.
The General would expect that those RFPs, if awarded, are going to require more beds than are presently available in the system.
Doc's "Field of Dreams" strategy ("Build it and they will come.") was arguably the right idea at the wrong time with the wrong vehicle. It stands to reason that there should be a higher margin in owner/operating as compared with only operating.
You make a good point. I have no way of knowing this for sure, but I'm willing to bet that, with the exception of some folks on this board :-), CCA's had an almost 100 percent turnover of its shareholder base since the management change in 2000.
And I've noticed over the past few years that this shareholder group doesn't seem as bothered by operational problems, or even non-renewal or losing contracts, as the old shareholder base did.
Not to go too far down memory lane, but I remember well when escapes, disturbances, and just general bad operational news had a big impact on the stock price. I also don't notice a big pressure to grow, even though CCA is still obviously a growth play. I suppose that's because there are still empty beds to be filled. But, based on the CC, it's likely that all empty beds could be filled within the next year pending results of RFPs that I think only CCA can fulfill.
I also think it's interesting that the CEO mentioned on the CC that owned beds are much better than managed beds because you can control your own destiny. Interestingly enough, his predecessor felt the same way.
No doubt the factors you mention could have had an effect on the stock price, but my own opinion is that general market factors are the most important. Most of the stocks I own are down, some a lot. Oil, Iraq and other uncertainties are weighing. Also a high oil price which lasts has been known to bring on a recession. It could be something to worry about, if you were so inclined.
My guess is that the price of CXW will be up some in September and more by Nov-Dec.
I must admit this is the first time I've had some reservations re: the current management.
Surely, if there were some reasonably acceptable explanation (change in family situation, an illness, etc.) for a COO's immediate resignation, it would have been stated in the PR.
When combined with the statement that they don't know whether they will replace him or change the organization structure, this can only be some level of bad news. Based on their track record to date, I am willing to assume that it is only minor bad news. But, they should have been more forthcoming.
My GUESS - they probably were planning on re-organizing in such a way that his domain would be reduced - and he begged to differ. I certainly hope that is all it is.
Almost surely, whatever is behind this announcement (which might be nothing at all) is what is pulling the stock back,IMHO.