CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Joe Gomes, Managing Director – Generalist Analyst, Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Prepping For an End to Title 42. Once again, during the quarter CoreCivic continued to hire staff in anticipation of an ending of Title 42 and a surge in ICE populations. The additional expense impacted margins. Management did note that without the extra expense, guidance for 2023 would have been in the ballpark of consensus estimates for the year.
Potential New Business? Management again noted increasing interest from various states, both current clients and potential new clients, for solutions as these parties deal with a very tight labor market. With excess bed capacity available and the staff hired, CoreCivic is well positioned to pick up additional business, in our view.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
There’s a lot of money being made through the business of professional sports leagues. The NBA, MLB, NHL, all have very profitable business models, and although the businesses are all similar, the NFL leads the other U.S. based leagues in generating revenue. The once tax-exempt entity has a dual business structure with multiple layers of income that continues to expand. Below we cover the multiple ways the NFL, and the months-long drive of more than 30 teams to the Superbowl, ring the register.
In 2015, the National Football League forfeited its tax-exempt status with the IRS. The league had benefitted from the unique status beginning in 1942. The decision was based in part on mounting criticism over its rapidly growing earnings streams.
These streams largely come from the 32 teams that make up the NFL, thirty-one of the ball clubs are privately owned, while just one, the Green Bay Packers, continues to operate under a non-profit public corporation status. The clubs all form a trade association through which funds are directed back to the NFL board, some find their way distributed back to the teams.
This form of entertainment rakes in money on many fronts. In-person attendance, TV viewers, different forms of wagering, and advertising dollars all feed into overall league revenue after costs such as salaries that can $50 million annually.
Tickets to the Super Bowl 2023 event between the Kansas City Chiefs and the Philadelphia Eagles are averaging about $10,000. The higher end seats are in the $40,000 range, about the same as a Tesla Model S.
Tax Exemption of Teams
The team with tax-exempt status is exempt from paying all or some of federal income taxes. This status had been maintained by all NFL teams from 1945 through 2015.
The NFL voluntarily opted to give up its tax-exempt status in 2015 and began paying taxes. Some contend this change avoids further negative public outcry. It seems the economic benefits were not as significant as the public relations disadvantages.
Business Structure
The league separates its income streams into local and national categories. On the national side, the NFL negotiates national merchandise, licensing, and television contracts. The 32 teams receive equal shares of this money, regardless of individual team performance.
Local income is generated through concession sales, ticket sales, and corporate sponsors. This doesn’t nearly cover the cost of fielding a professional football team. Using the Green Bay Packers as a benchmark, the team had expenses totaling $410 million in its fiscal year 2021. Most of this number was attributable to player salaries, with the remainder used for stadium maintenance, advertising, and team and administration expenses.
How Teams Make Money
The majority of any NFL team’s revenue comes from TV arrangements. Ticket revenues, licensing, merchandising agreements, and endorsement deals are additional income sources.
Revenue of All National Football League Teams from 2001 to 2021 (in billion U.S. dollars)
Televised Rights and Deals – The Super Bowl is among the most watched television events in America each year. The regular games broadcast on Sundays, Mondays, and Thursdays throughout the regular season will consistently have the best TV ratings. This is why media corporations pay an above average amount for the right to broadcast them.
The traditional television industry now competes with other video-based programming, all pulling the attention of those seeking entertainment. The NFL audience and draw are not in decline. NFL teams still generate massive local and even international revenue through TV contracts. The individual clubs receive significant amounts from television providers thanks to multibillion-dollar contracts, and there are even more television viewers and broadcasts of games than other programs on set.
Image Credit: Karen (Flickr)
Tickets and Vendor Rental – Far below the rapidly increasing money from TV deals, ticket sales are a large source of income for individual teams. NFL games often sell out, with an estimated average ticket price of $151 and a stadium capacity of roughly 70,000. It’s a nice add-on to broadcast viewership.
NFL teams can also use their stadiums to hold non-football activities, like concerts within local restrictions.
The cash flow on the rental of space to vendors to sell food and drinks at games are also significant in a stadium with 70,000 fans as a captive audience.
Image Credit: RaymondClarkeImages (Flickr)
Official Sponsorships – Corporate sponsors pay NFL teams to put their logos on products, TV transitions, player jerseys, etc. The franchise rights to NFL grounds naming of stadiums are extremely desirable among corporate advertisers.
The naming right to So-Fi Stadium in LA, home of the Los Angeles Rams, is in the neighborhood of $30 million annually, and similar rights to Allegiant Stadium in Las Vegas is estimated at between $20 and $25 million annually.
Gambling Franchises – Some NFL teams take advantage of this method by opening betting platforms in their stadiums, collaborating with well-known casinos, creating online sports betting websites, and other strategies. This is an area of rapid expansion as sports betting becomes legalized across the US and technology provides opportunities for betting on fragments of the game in addition to the more traditional methods. Incremental income from these growing arrangements has expanded income opportunities among teams.
Image Credit: Karen (Flickr)
Costs
Overall, like any business, the NFL will undoubtedly explore all the opportunities for meaningful income that present itself. Of course the overall income is best measured net of expenditures that include marketing, cost of athletes and other entertainers, management, upkeep, and renovations.
Take Away
One of the most financially successful professional sports leagues in the US and across the globe is the NFL. Most of the teams’ revenues are generated from broadcasting and licensing deals. The growth in revenue, with the exception of one year during the pandemic curbs, has been accelerating. Technology has brought new methods to gamble on sports, along with some friendly gaming legislation across the nation. This is additive to the bottom line.
It appears that the trend, which has survived some public relations setbacks, isn’t going to continue as Americans tend to spend many hours during the winter months immersed in the sport of football.
CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Joe Gomes, Managing Director – Generalist Analyst, Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Solid 4Q22 Operating Results. CoreCivic beat expectations for 4Q22. Reported revenue was $471.4 million, compared to $472.1 million in the year ago period and our estimate of $465 million. Reported net income was $24.4 million, or $0.21 per diluted share, compared to $28 million, or $0.23 per share, last year. We had forecast net income of $14.5 million, or $0.13 per share. Adjusted EBITDA for the quarter was $87.7 million, compared to our $73.1 million estimate, and $103.2 million in 4Q21.
La Palma Normalizing, but Labor Remains a Challenge. CoreCivic substantially completed the transition of inmate populations at La Palma during the quarter, a positive. However, staffing remains a challenge, with temporary incentives, above average wage pressure, and travel costs, all impacting margin, which we anticipate will continue through at least the first quarter of 2023.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
A Journey from Work to Home is about More than Just Getting There – the Psychological Benefits of Commuting that Remote Work Doesn’t Provide
For most American workers who commute, the trip to and from the office takes nearly one full hour a day – 26 minutes each way on average, with 7.7% of workers spending two hours or more on the road.
Many people think of commuting as a chore and a waste of time. However, during the remote work surge resulting from the COVID-19 pandemic, several journalists curiously noted that people were – could it be? – missing their commutes. One woman told The Washington Post that even though she was working from home, she regularly sat in her car in the driveway at the end of the workday in an attempt to carve out some personal time and mark the transition from work to nonwork roles.
This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Matthew Piszczek, Assistant Professor of Management, Wayne State University, Kristie McAlpine, Assistant Professor of Management, Rutgers University.
As management scholars who study the interface between peoples’ work and personal lives, we sought to understand what it was that people missed when their commutes suddenly disappeared.
In our recently published conceptual study, we argue that commutes are a source of “liminal space” – a time free of both home and work roles that provides an opportunity to recover from work and mentally switch gears to home.
During the shift to remote work, many people lost this built-in support for these important daily processes. Without the ability to mentally shift gears, people experience role blurring, which can lead to stress. Without mentally disengaging from work, people can experience burnout.
We believe the loss of this space helps explain why many people missed their commutes.
One of the more surprising discoveries during the pandemic has been that many people who switched to remote work actually missed their commutes. Gerald Streiter (Flickr)
Commutes and Liminal Space
In our study, we wanted to learn whether the commute provides that time and space, and what the effects are when it becomes unavailable.
We reviewed research on commuting, role transitions and work recovery to develop a model of a typical American worker’s commute liminal space. We focused our research on two cognitive processes: psychological detachment from the work role – mentally disengaging from the demands of work – and psychological recovery from work – rebuilding stores of mental energy used up during work.
Based on our review, we developed a model which shows that the liminal space created in the commute created opportunities for detachment and recovery.
However, we also found that day-to-day variations may affect whether this liminal space is accessible for detachment and recovery. For instance, train commuters must devote attention to selecting their route, monitoring arrivals or departures and ensuring they get off at the right stop, whereas car commuters must devote consistent attention to driving.
We found that, on the one hand, more attention to the act of commuting means less attention that could otherwise be put toward relaxing recovery activities like listening to music and podcasts. On the other hand, longer commutes might give people more time to detach and recover.
In an unpublished follow-up study we conducted ourselves, we examined a week of commutes of 80 university employees to test our conceptual model. The employees completed morning and evening surveys asking about the characteristics of their commutes, whether they “shut off” from work and relaxed during the commute and whether they felt emotionally exhausted when they got home.
Most of the workers in this study reported using the commute’s liminal space to both mentally transition from work to home roles and to start psychologically recovering from the demands of the workday. Our study also confirms that day-to-day variations in commutes predict the ability to do so.
We found that on days with longer-than-average commutes, people reported higher levels of psychological detachment from work and were more relaxed during the commute. However, on days when commutes were more stressful than usual, they reported less psychological detachment from work and less relaxation during the commute.
Creating Liminal Space
Our findings suggest that remote workers may benefit from creating their own form of commute to provide liminal space for recovery and transition – such as a 15-minute walk to mark the beginning and end of the workday.
Our preliminary findings align with related research suggesting that those who have returned to the workplace might benefit from seeking to use their commute to relax as much as possible.
To help enhance work detachment and relaxation during the commute, commuters could try to avoid ruminating about the workday and instead focus on personally fulfilling uses of the commute time, such as listening to music or podcasts, or calling a friend. Other forms of commuting such as public transit or carpooling may also provide opportunities to socialize.
Our data shows that commute stress detracts from detachment and relaxation during the commute more than a shorter or longer commute. So some people may find it worth their time to take the “scenic route” home in order to avoid tense driving situations.
The Percentage Volume of Retail Transactions Has Surpassed 2020’s Level
Retail investors were a strong market force in 2021, and after a hiatus through much of 2022, they may be setting the tone in 2023. As a whole, the investors that fall into this category are watching signs that the US Federal Reserve and other central banks may be near the end of their rate hikes. This, coupled with last year’s sell-off, was taken as a sign to selectively jump back into positions. The positions they have been putting on have been moving the needle in the “risk-on” category; this has sent many of last year’s losers up double digits.
Data from JP Morgan demonstrate retail transactions have recently surpassed the market volume peak reached in the Fall of 2020. The more volume as a percentage of trades, the more influence over price movements any investment group has.
JPMorgan Data Shows Retail’s Market Percentage Has Quickly Grown
Retail Investors as % of Investors (JPM)
What Prices Have They Impacted?
During the last week in January, retail market orders as a percent of market value reached 23%, according to JPMorgan. Comparatively, it got to 22% a few times when GameStop (GME) was confounding institutional money while surging in valuation. As with the increase in retail volume during 2020, the renewed interest in committing to trades can have an outsized impact on sector movements and those of favorite stocks.
During the pandemic lockdown period, many self-directed investors chose to follow groups such as r/WallStreetBets on Reddit and forums on other chatrooms and platforms. One strategy that worked was directed at hedge fund short positions. It involved massive buying of stocks that were heavily shorted. The goal was to force the shorts to cover, which would produce buying and a higher stock price. This was effective enough to have caused significant problems with both institutional investors and the brokerage community settling the trades.
As January came to a close Many of the same risk trades, have gotten attention. AMC Theatres (AMC) is up 70% YTD. Cathie Wood’s ARKK fund, which invests in speculative disruptive companies, has risen nearly 46%. Also in the fund category is an ETF that invests in so-called meme stocks (MEME), this is up 41%.
Bitcoin (BTC.X), which had been presumed on its deathbed toward the end of last year, is up over 42% as it continues to track technology.
Will They Again Score?
“Mark my words, it’s going to end in tears,” was a popular line amongst market pundits back in 2020-2021. The Great Unwashed, the Meme Stock Investors, the market participants Jim Kramer called Robin Hoodies don’t have a long track record. But the track record they do have is worth noting.
According to JP Morgan, as of the first week in February, Tesla (TSLA) was the most sold stock by retail investors. Others that have been sold include those categorized as green and infrastructure stocks tied to EVs and 5G broadband.
The most purchased were Amazon (AMZN) and APPLE (AAPL). The hashtag #MOASS, or Mother of All Short Squeezes, has been trending most days on Twitter. The stock tied to the posts is AMC (AMC, APE), as there has been ongoing news surrounding this classic meme stock. One meme stock that has not attracted that much attention is Bed Bath and Beyond (BBBY). The company, which is trading at $3.20 after having been at $22.80 less than a year ago, is on life support, and closing dozens of stores amongst talk of bankruptcy. For those that were able to withstand the retail short-squeeze in BBBY, they may be able to cash in.
Take Away
If the “risk-on” trend among retail investors continues, discretionary institutional money has learned to pay attention. Self-directed investors should also pay attention to new activity, and any rotation from one cooling sector to one that is heating up.
In addition to following the news on Channelchek, investors can watch the Investor Movement Index (IMX) reported on the last weekend of each month by TDAmeritrade. For additional insight, it is always fun to check in on what the message boards are buzzing about and sorting through the serious and the nonsensical on Reddit and Twitter.
TROY, Mich., Feb. 2, 2023 /PRNewswire/ — Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, will release its fourth-quarter and full-year earnings before the market opens on Thursday, February 16, 2023. In conjunction with its fourth-quarter and full-year earnings release, Kelly will publish a financial presentation on the Investor Relations page of its public website and will host a conference call at 9 a.m. ET.
The call may be accessed in one of the following ways:
Via the Telephone (877) 692-8955 (toll free) or (234) 720-6979 (caller paid) Enter access code 5728672 After the prompt, please enter ”#”
A recording of the conference call will be available after 2:30 p.m. ET on February 16, 2023, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 1472042#. The recording will also be available at kellyservices.com during this period.
About Kelly®
Kelly Services, Inc. (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, Light Industrial, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 350,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was $4.9 billion. Visit kellyservices.com and let us help with what’s next for you.
Corporate Debt for Equity Swap Announcements Can Have an Immediate Impact on Share Price
AMC Theatres (AMC, APE) announced plans to hold a meeting in mid-March on capital restructuring. One of the expected outcomes is a plan to swap equity for some outstanding debt. APE shares jumped after the announcement. Another company this week, Motorsports Games (MSGM), shares skyrocketed triple-digits after its announcement to shore up company finances with a debt-for-equity swap. What is a debt/equity swap, and does it always lead to strengthening share prices?
Debt for Equity Swap Basics
Two methods by which companies finance their operations, growth, or other investment is by issuing stock (equity), or borrowing (debt). Both have advantages and disadvantages. One reason a company may swap equity for debt is to restructure and reduce borrowings with a creditor. Perhaps cash flow is tight and restrictive, yet the entity is still viable. Cutting interest costs frees capital and may even help the lender avoid problems receiving timely payments.
The company may also use the method to strengthen its balance sheet by altering the proportion of debt to equity.
Motorsports Games Swap
In the case of Motorsports Games (MSGM), the company had fallen out of compliance with the rules required to maintain a listing on the Nasdaq exchange. MSGMs change in corporate financing allowed it to move back into full compliance with Nasdaq, while repaying $1 million in debt with 338,983 shares of stock. The move has the added benefit of increasing liquidity and reducing interest expense.
According to a research note by Mike Kupinski, Director of Research at Noble Capital Markets, “Following the swap, the parent company increased its ownership from 700,000 shares to 1,038,983 shares, representing 62.1% of the votes outstanding.” Kupinski said, “The move significantly improves the company’s liquidity and reduces its interest expense. Notably, the move adds confidence that Motorsport Network has confidence in Motorsport Games.”
The CEO of AMC, Adam Aron, has proven to be very creative with financing. The company managed to cash in on a windfall after its share price soared during periods when shorts in the company had been severely squeezed by retail traders. This has left the company with enviable options. The company is planning a capital restructuring, including swapping equity for its debt. Details of this won’t be released until next month after AMC Theatres holds a special meeting on March 14 to discuss the deal.
If past history is any indication, there will be a lot of chatter and trading activity in AMC and APE before and after the meeting.
Take Away
The primary reason for a company to contemplate a debt-to-equity swap is to adjust its financing to improve financial conditions. In some cases, the company finds itself being hurt by the cost of servicing its debt, this offers relief. Avoiding any negative news surrounding missing a payment or even bankruptcy is often an underlying reason.
But there can be as many reasons as there are corporate situations. Motorsports Games seem to have hit a home run for their shareholders and their holding company as its share price is now trading over 700% above where it had been before the announced plans.
The massive increase in share price of MSGM is unusual, gains this large are situation dependent. Maintaining a position on a major exchange certainly fed into the rally in its shares.
BRENTWOOD, Tenn., Jan. 24, 2023 (GLOBE NEWSWIRE) — CoreCivic, Inc. (NYSE: CXW) (the Company) announced today that it will release its 2022 fourth quarter financial results after the market closes on Wednesday, February 8, 2023. A live broadcast of CoreCivic’s conference call will begin at 10:00 a.m. central time (11:00 a.m. eastern time) on Thursday, February 9, 2023.
To participate via telephone and join the call live, please register in advance here https://register.vevent.com/register/BId87fe936f05a41fa8057f46bf4310550. Upon registration, telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and a unique passcode.
Participants may access the audio-only webcast of the conference call from the Company’s website at www.corecivic.com under the “Events & Presentations” section of the “Investors” page. A replay of the webcast will be available for seven days.
About CoreCivic
CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Tokens.com Corp is a publicly traded company that invests in Web3 assets and businesses focused on the Metaverse, NFTs, DeFi, and gaming based digital assets. Tokens.com is the majority owner of Metaverse Group, one of the world’s first virtual real estate companies. Hulk Labs, a wholly-owned Tokens.com subsidiary, focuses on investing in play-to-earn revenue generating gaming tokens and NFTs. Additionally, Tokens.com owns and stakes crypto assets to earn additional tokens. Through its growing digital assets and NFTs, Tokens.com provides public market investors with a simple and secure way to gain exposure to Web3.
Joe Gomes, Managing Director – Generalist Analyst, Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Genesis Global. In a recurring theme in the crypto space lately, last week Genesis Global Holdco LLC, the holding company of troubled cryptocurrency lender Genesis Global Capital, filed for Chapter 11 bankruptcy protection. Notably, in its filing, Genesis Global Capital said it expects that through the restructuring process, there will be money left over to pay unsecured creditors.
Tokens.com Impact. Tokens.com has an open loan facility with Genesis, for which the Company is required to post collateral in token assets. Based on the closing price on January 19, 2023, this collateral was worth US$749,000. Tokens.com has a loan outstanding against this collateral of US$138,000. The difference between the collateral and the loan value represents approximately 3.1% of Tokens.com’s total assets of US$20.0 million as at September 30, 2022. Tokens.com has requested to have its collateral returned and repay the loan outstanding in full.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
With a Light Week Ahead for Economic Reports, Investors Eye Big-Tech Earnings
In contrast to recent weeks, which began quietly as investors waited on late-week releases (i.e.: inflation, Beige Book, Fed announcements, etc.) before getting involved, this week is relatively quiet for economic reports. With less to be concerned about undermining any new positions, early week activity, without a holiday, may help increase volume. The scarcity of economic numbers could also cause more attention to be paid to earnings reports. This coming week we’ll receive a slew of big tech companies reporting. Disappointment may cause tech, which is showing signs of life early in 2023, to fall behind again. Whereas surprises on the upside could help unwind some of last year’s dismal big tech performance. Small Cap stocks, for their part, are keeping pace with the Nasdaq 100 mega stocks.
Earnings of both small-caps and mega-caps this week may produce a clear front-running segment based on capitalization.
There’s a Fed meeting next week. While the consensus seems to be for a 25 bp hike, Fed governors have been clear in recent addresses that the tightening cycle is not over. The PCE number late this week is considered the Fed’s favorite inflation gauge. There are no scheduled addresses by Fed regional presidents leading up to the two-day meeting that concludes on February 1.
Monday 1/23
8:30 AM ET The index of leading economic indicators, which has been in steep decline (dropped a full 1.0 percent in November), is expected to have fallen a further 0.7 percent in December. The index of leading economic indicators is a composite of 10 forward-looking components, including building permits, new factory orders, stock market performance, and unemployment claims. As such, estimates pre-report tend to be very close to the actual number. The report attempts to predict general economic conditions six months out.
Tuesday 1/24
9:45 AM ET, The Purchasing Managers Index (PMI) has been drifting down further into contraction – no relief is expected for January. Manufacturing is seen at 46.5 with services at 45.5.
Wednesday 1/25
7:00 AM ET, the Mortgage Bankers’ Association (MBA) compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction. The composite index is expected to come in at 27.9%, while the Purchase applications are expected to show a reading of 24.7%. The data provides a gauge of not only the demand for housing but economic momentum.
Thursday 1/26
8:30 AM ET, Forecasters see Durable Goods Orders rebounding 2.8 percent in December, which would more than reverse November’s steep 2.1 percent decline. Yet the gain is seen concentrated in aircraft as both ex-transportation and core capital goods orders are seen falling 0.2 percent.
8:30 AM ET, Gross Domestic Product, or GDP for the fourth quarter is expected to have slowed to a 2.7% annualized growth versus third-quarter growth of 3.2%. Positive growth would indicate that the economy is not in a recession.
8:30 AM ET, Jobless Claims are a weekly report. For the January 21 week, it is expected to come in at 202,000 versus a very low 190,000 in the prior week. The Fed focuses on jobs; the very strong numbers (low) suggest the Fed has room to tighten without being overly disruptive to job creation. Also, a tight labor market can be viewed as inflationary.
10:00 AM ET, New Home Sales in December are expected to revert to the downward trend at a 614,000 annualized rate versus November’s 640,000. Higher home sales reverberate throughout the economy in terms of spending and growth.
Friday 1/27
• 8:30 AM ET, Personal Income is expected to have increased a monthly 0.2 percent higher in December, with consumption expenditures expected to have decreased 0.1 percent. These would compare with respective November gains of 0.4 and 0.1 percent.
The PCE inflation readings for December, which are part of the PI numbers, are expected to show no change overall and up 0.3 percent for the core (versus respective gains of 0.1 and 0.2 percent) for annual rates of 5.0 and 4.4 percent (versus November’s 5.5 and 4.7 percent).
What Else
The Federal Reserve is very likely through most of its overnight Fed Funds tightening cycle. Japan, which had gone through decades of having a deflation problem, is now experiencing the highest inflation in 41 years. The Bank of Japan has not adopted the aggressively hawkish monetary policy that the US has. The US central bank, chaired by Jerome Powell, must be looking on and holding his stated opinion that he’d rather do too much tightening than too little.
The so-called Beige Book is receiving much more attention from market participants than it has in years as they seek insight into the near- and long-term economic direction. The report is published eight times yearly and released about two weeks before the FOMC scheduled meetings. It contains anecdotal trends and moods from each of the 12 Federal Reserve districts. The information is collected and summarized and is relied on as part of the discussion topics at the Fed policy meetings.
The report released on January 18th was collected on or before January 9th. While each Federal Reserve district may have different economic experiences, for example, manufacturing regions may have a very different perspective than agricultural areas or districts where service jobs are more prevalent.
30,000 Foot View
The first Beige Book of 2023 shows the US economy is holding steady. However, there are only small amounts of growth experienced in some regions, while others expect small pockets of expansion. This overall summary would be difficult to use as an argument for the Fed to alter course from its stated intention of additional tightening, including Fed Funds rate hikes. The next meeting will be held on January 31st and February 1st.
“On balance, contacts across districts said they expected future price growth to moderate further in the year ahead,” the survey said.
The report doesn’t contain many surprises and confirms current expectations that residential real estate activity is sluggish, the labor market is strong, and that inflation is running at a slower pace of growth.
There is very little in January’s Beige Book that would alter analysts’ expectations of what the next monetary policy adjustment might be. Those that are expecting a 0.50% increase are not likely to shift their thinking from the summaries, and those expecting a 0.25% hike are similarly not inclined to shift their thinking. Most analysts fall into one of these two categories.
A Sign the Markets Wanted
In a recent interview, Cleveland Fed President Loretta Mester said the slowdown in inflation shows the Fed’s work raising rates is having the desired effect; she also suggested that further increases are still needed. “We’re beginning to see the kind of actions that we need to see,” Mester stated; these are “good signs that things are moving in the right direction. That’s important input into how we’re thinking about where policy needs to go.” This is heartening for those hoping for fewer rate hikes as Mester is considered one of the US central bank’s more hawkish members.
Take Away
The markets got a mixed bag with no clear change of direction from the summary of Federal reserve districts, otherwise known as the Beige Book. This could mean there will be few surprises at the close of the FOMC meeting on February 1st.
At least one Fed hawk is softening her rhetoric going into the meeting. If the trend continues, the prospect of fewer rate hikes should be viewed as positive for stocks and positive for bonds.
Cathie Wood Reveals 2022’s Most Disruptive and Innovative Technologies
ARK Invest’s Cathie Wood penned a lookback-themed article about the innovations and disruptive companies of 2022. The purpose seemed to be to remind followers that although during the year, investors may have become disheartened with innovation, ‘look at the amazing opportunities that occurred.’ The innovations and companies highlighted were somewhat overlooked; following the path we are accustomed to from many breakthroughs, they fly under the radar. Then, suddenly they’re widely adopted. Below are many of her picks for innovation and companies she may now wish her funds held large positions in.
The Future of Internet
Suddenly everyone is talking about ChatGPT. According to Wood, artificial intelligence (AI), specifically, ChatGPT is advancing at a pace that is surprising even by standards set by earlier versions. This version of GPT-3, optimized for conversation, signed up one million users in just five days. By comparison, this onboarding of users is incredibly fast benchmarked against the original GPT-3, which took 24 months to reach the same level.
In 2022, TV advertising in the US underwent significant changes. Traditional, non-addressable, non-interactive TV ad spending dropped by 2% to $70 billion, according to Wood. Connected TV (CTV) ad spending on the same terms increased by 14% to ~$21 billion. Pure-play CTV operator Roku’s advertising platform revenue increased 15% year-over-year in the third quarter, the latest report available, while traditional TV scatter markets plummeted 38% year-over-year in the US. Roku maintained its position in the CTV market as the leading smart TV vendor in the US, accounting for 32% of the market.
Digital Wallets are replacing both credit cards and cash. In the category of offline commerce. They overtook cash as the top transaction method in 2020 and accounted for 50% of global online commerce volume in 2021. As an example of the growth, Square’s payment volume soared 193%, six times faster than the 30% increase in total retail spending 2019-2022 (relative to pre-COVID levels).
While overall e-commerce spending increased by 99% over the last three years, social commerce merchandise volume grew even faster. Shopify’s gross merchandise volume grew by 312%, almost four times faster than overall e-commerce and taking a significant share from other retail.
Underlying public blockchains continue to process transactions despite what may be going on surrounding the connected industries. Wood says it highlights that “their transparent, decentralized, and auditable ledgers could be a solution to the fraud and mismanagement associated with centralized, opaque institutions.” She explains, “After the FTX collapse, the share of trading volume on decentralized exchanges, which allow for trading without a central intermediary, rose 37% from 8.35% to 11.44%.
Genomic Revolution
Base editing and multiplexing have the potential to provide more effective CAR-T treatments for patients with otherwise incurable cancers. Cathie Wood provided an example from 2022 about a young girl in the UK with leukemia that went from hopeless in May to Canver-free in November.
In 2022 Dutch scientists at the Hubrecht Institute, UMC Utrecht, and the Oncode Institute used another form of gene editing called prime editing to correct the mutation that causes cystic fibrosis in human stem cells. Another example of how it is being adopted comes from Korean researchers at Yonsei University that used prime editing successfully to treat liver and eye diseases in adult mice.
CRISPR gene editing in Cathie’s words, “has delivered functional cures for beta-thalassemia and sickle cell disease.” She gives examples: CRISPR Therapeutics and Vertex Pharmaceuticals which together have treated more than 75 patients, resulting in some well-publicized “functional cures”. They are expecting FDA approval for Exa-Cel, the treatment for sickle cell and beta thalassemia, in early 2023.
In the category the Ark Invest founder referred to as other cell and gene therapies, she says in 2022, regulators approved several landmark cell and gene therapies. The examples she used to highlight this are Hemgenix for the treatment of Haemophilia B, Zyntelgo for beta thalassemia, Skysona for cerebral adrenoleukodystrophy, Yescarta and Breyanzi for Non-Hodgkin lymphoma, Tecartus for mantle cell lymphoma, and Carvykti and Abecma for multiple myeloma.
Liquid biopsies, blood tests via molecular diagnostic testing are enabling the early detection of colorectal cancer which, if discovered at or before stage 1, have a five-year survival rate greater than 90%. Late-stage or metastatic cancers account for more than 55% of deaths over a five-year period, but only 17% of new diagnoses.
Autonomous Technology & Robotics
During 2022 electric vehicle maker Tesla sales increased by 49% even as automobile sales declined by 8%. Tesla’s share of total auto sales in the US has increased to 3.8% from 1.4% in three years.
During 2022, GM expanded its autonomous driving taxi service to most of San Francisco in the first large-scale rollout in a major US city. Then it launched in both Phoenix and Austin late in the year. The automaker with a stodgy reputation, managed to compress the time to commercialization from nine years in San Francisco to just 90 days in Austin. Tesla, for its part, expanded access to its FSD (full self-driving) beta software to all owners in North America who had requested access.
By January 4, 2023, both Amazon and Walmart had begun deliveries using drones in select US cities. Autonomous logistics technology is no longer futuristic and is likely to continue being adopted and expanded.
Across the top 50 medical device companies, 90% rely on 3D printing for prototyping, testing, and even in some cases printing medical devices.
In 2022, SpaceX nearly doubled the number of rockets it launched to 61. It reused the same rocket in as few as 21 days, a dramatic improvement over the 356 days required for its first rocket reuse. Private Space Exploration is a reality. 61 rockets is an average of more than one per week.
Take Away
Hedge fund manager Cathie Wood took the new year as an opportunity to communicate examples of game-changing innovation that the equity market largely ignored in 2022. She finds these as confidence building that the premise of many of her managed funds is with merit. More importantly, in the face of market headwinds and media criticism, she wants these examples to help boost investor confidence “that ARK’s strategies are on the right side of change.” She tells readers, “innovation solves problems and has historically gained share during turbulent times.”
The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 103 facilities totaling approximately 83,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.
Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
New Contract. The GEO Group was awarded a contract from the Department of Justice and Community Safety in the State of Victoria for the delivery of primary health services across 13 public prisons. The contract will commence on July 1, 2023 and is expected to generate approximately $33 million in incremental annualized revenue for GEO. We view the new contract as a nice compliment to the existing operations.
A New (Old) Business. This is a return of GEO to a business previously conducted by the Company. The Company held this contract before being forced to spin off the unit once becoming a REIT. GEO already provides these services in the facilities it manages and the new contract is just an expansion to other non-managed facilities. There should not be any “learning curve,” in our view.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
