CXW

CoreCivic is firing on its operational story: FY2025 revenue jumped +12.7% to $2.21B after three flat years ($1.85–1.96B in 2021–2024), and net income (+69.2% to $117M) and diluted EPS (+74.2% to $1.08) inflected sharply. The MD&A explains why — five idle facilities were activated in 2025 and the Farmville Detention Center (acquired July 2025 for $71.4M) adds ~$40M of annual ICE revenue. The Risk Factors lay out a genuine, durable demand driver: the January 2025 executive orders directing DHS/ICE to expand detention capacity, the reversal of the Biden DOJ private-facility wind-down (re-opening BOP/USMS demand), and the Laken Riley Act mandating ICE detention of certain individuals. Management also flags a 2026 capex step-down ($35–40M on idle activations vs. $75M in 2025) plus higher expected operating cash flow, which frees capital for the buyback — they repurchased $218.4M (11.2M shares) in 2025, shrank the share count 10.2%, and still have $300.5M of authorization left under a $700M program.

The other side is why this is a hold, not a buy. The quality metrics are mediocre for a 28x P/E: net margin is just 5.3%, operating margin 7.4%, and ROE only 8.3%. Operating cash flow actually fell 27.7% to $195M even as net income surged, and capex doubled (+101%) — so the headline EPS growth has not yet converted to stronger cash generation. The balance sheet is adequate but tightening: long-term debt rose 23.8% to $1.21B, cash is a thin $97.9M, liabilities/equity climbed to 1.32x, and retained earnings remain negative (-$123M). The buybacks, partly funded with revolver borrowings, are spending down equity (down 5.9%) rather than reinvesting at high returns.