May 25, 2011
CA budget plans sink CCA stock
Last week, we reported on how a Supreme Court decision had hammered shares of Corrections Corp. of America. That, says Avondale Partners analyst Kevin Campbell, was well wide of the mark: The real cause of investors' ulcers was an outline of California's proposed budget, which now seeks to cut almost $260 million in prison spending.
Austerity on that scale would take a big bite out CCA's bottom line, Campbell said, because California accounts for about 30 percent of the company's earnings per share. But, Campbell adds, the chances of the prison funding cuts becoming final is 10 percent at the most.
The proposals require the support of Republicans on multiple fronts, including the passage of the budget, the extension of tax increases, and a constitutional amendment to guarantee funding for a shift of inmates from state prisons to county jails. Even with support from Republicans, which we view as unlikely, the tax increase and constitutional amendment still require voter approval as well....
LINK - NashvillePost.com
