CoreCivic upgraded to ’BB’ by S&P on immigration policy tailwinds

Investing.com -- S&P Global Ratings has upgraded CoreCivic (NYSE:CXW) Inc. to ’BB’ from ’BB-’ with a stable outlook, citing the company’s solid performance and industry tailwinds from the current U.S. administration’s immigration policies.

The prison operator has maintained leverage below 3x over the past two years, aligning with its public target of 2.25x-2.75x leverage. S&P expects CoreCivic to increase revenue and EBITDA over the next 12 months as it benefits from aggressive immigration enforcement.

Since the current administration took office, CoreCivic has announced contract modifications to add capacity for Immigration and Customs Enforcement (ICE) across four facilities, signed agreements to activate two idle facilities, and acquired a new facility in Farmville, Virginia.

The company has also resumed operations at its South Texas Family Residential Center in Dilley, Texas, which S&P projects will generate $180 million in annual revenue and approximately $65 million in EBITDA.

The recently passed budget bill in early July 2025 significantly increases funding for immigration enforcement, which S&P believes will drive greater demand for CoreCivic’s services. The rating agency expects some EBITDA margin contraction to the high 17% range in 2025 as the company ramps up facilities, with margin expansion anticipated in 2026.

S&P also noted that the Laken Riley Act, passed in early 2025, will likely establish a new baseline demand for CoreCivic’s services by requiring the government to detain undocumented immigrants charged with crimes. This legislation is expected to keep ICE’s detention authorization above 50,000 beds across different presidential administrations.

The stable outlook reflects S&P’s expectation that CoreCivic will perform in line with forecasts and maintain leverage below 3x. A ratings downgrade could occur if leverage rises above 3x on a sustained basis, while an upgrade would require business diversification or a more conservative financial policy maintaining leverage below 2x.

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