Private prison stocks soared in morning trading Wednesday, fueled by Donald Trump's surprise presidential victory.
Stocks made a modest climb in volatile trading at market open, calming the nerves of investors who saw futures markets crater overnight. Private prison companies, however, soared. Corrections Corp. of America (CXW) , which recently rebranded as CoreCivic, surged 36.22% to $19.33 in late-morning trading, and The Geo Group (GEO) climbed 17.25% to $28.00. Both stocks took major hits over the summer when the U.S. government signaled it would phase out its use of private prisons.
The Department of Justice in mid-August announced plans to end its use of private prisons after concluding such facilities do not provide the same level of services in terms of safety or cost as those run by the government. The announcement sent both Geo and CCA tumbling. The companies were dealt another blow days later when Department of Homeland Security Secretary Jeh Johnson said the Homeland Security Advisory Council would create a committee to review its policy and practices concerning private prisons.
In 2015, the U.S. federal government accounted for 45% of Geo's revenues. For CCA, it accounted for 51% of total revenues that year. Last year, the companies reported $1.84 billion and $1.79 billion in revenue, respectively.
Any concerns over lost federal business appear to have been washed away by Trump's win. In fact, both companies stand to benefit from his campaign trail policies, should they be enacted.