What happened
Shares of The GEO Group (GEO +0.80%) were pulling back today after the private-prison real estate investment trust (REIT) beat estimates on the top line but missed on the bottom line in the fourth quarter. Guidance also called for flat growth in 2023.
After the stock surged over the past year, investors seemed to think it was overbought, and shares were down 12.1% as of 10:44 a.m. ET on Tuesday.
NYSE: GEO
Key Data Points
So what
The GEO Group, which operates prisons and other detention facilities in the U.S., U.K., Australia, and South Africa, said revenue in the fourth quarter rose 11% to $620.7 million, which topped the analyst consensus at $604.4 million.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the quarter were $145.5 million, up from $124.1 million a year ago. But rising interest rates led to a jump in interest expense from $33 million to $53.2 million. And adjusted earnings per share declined from $0.38 to $0.34, which was well below analyst estimates at $0.60. Adjusted funds from operations per share, a reflection of the cash GEO can return to shareholders, fell from $0.66 to $0.58.
The company touted its efforts to lower its debt burden, which is down from $2.64 billion at the end of 2021 to $1.98 billion at the end of 2022. However, rising interest rates have made that debt more expensive, eating into the bottom line.
CEO George Zoley said, "Our strong results also positioned us to reduce our net debt to approximately $1.975 billion and our net leverage to approximately 3.7 times adjusted EBITDA by year-end 2022."
Now what
Looking ahead to 2023, the company expects full-year revenue of $2.37 billion to $2.47 billion, or just 2% growth at the midpoint due in part to a decline in one program with the U.S. Department of Homeland Security. It also called for adjusted EBITDA of $500 million to $540 million for 2023, which represents a slight decline at the midpoint, and said net interest expense would rise by an estimated $67 million this year.
Given that guidance, it's not surprising to see the stock sliding today.
