This $1 Billion Surprise Just Changed Everything for GEO Stock

While earnings appeared mixed at first glance, management’s comments on the most recent earnings call were sufficient to ignite a sharp rally in GEO shares.

Prior to the earnings call, GEO stock had been in a sustained downtrend with little cushion on the horizon ready to halt the decline but that all changed when management revealed a new, billion dollar contract that took the Street by surprise.

At first glance, it wasn’t clear that anything materially game-changing would emanate from the report given that Q4 earnings missed analysts forecasts. But the turnaround was swift and sentiment quickly flipped bullish following the conference call.

By the middle of the day, the share price had flipped from red to green and continued to surge higher, so will the momentum continue?

Key Points

• GEO’s weak Q4 earnings were overshadowed by a new 15-year, $1 billion ICE contract, which wasn’t included in 2025 guidance, signaling major revenue upside.

• Management’s cautious 2025 outlook excludes potential new contracts, suggesting earnings could exceed expectations as deals materialize.

• GEO plans to cut debt by up to $175M in 2025 and hinted at future dividends or buybacks, boosting investor confidence.

Earnings Disappoint But That’s Just Part of the Story

For Q4, revenues were virtually flat on the year, and came in at $607.7 million, a figure that didn’t veer too much from analysts’ expectations of $607.5 million.

The full year revenues for 2024 were $2.42 billion, again not a meaningful change on a period-over-period basis because 2023 figures were $2.41 billion.

Net income was $15.5 million for the quarter, down from $25.2 million in Q4 2023. But it plunged to just $32 million for the full year from $107 million in 2023. It wasn’t quite as bad as it seems at first glance, though, because a one-time debt extinguishment cost was largely to blame.

Still, there was little that appeared to provide shareholders with optimism as profit margins were squeezed and expenses grew faster than revenues.

So, why the bull run post-earnings? Cue the GEO conference call.

Forward Guidance Fuel GEO Stock Optimism

The big shift in market movements came when sentiment did a U-turn as management turned their attention to 2025’s forward-looking statements. In particular, recently awarded contracts deserve the plaudits.

Management forecast full-year 2025 net income of $0.74 to $0.88 per diluted share on approximately $2.5 billion in revenue​ and projects adjusted EBITDA between $460 million and $485 million​. If those numbers are close to coming to reality, it will mean a roughly a tripling of GAAP EPS versus 2024’s $0.22.

We need to note that much of that growth is because last year’s profits were on the low side due to the debt extinguishment charges. Notably, the guidance range for 2025 is in line with GEO’s 2024 adjusted EPS of $0.75​.

Indeed, the guidance came in well below Wall Street’s earlier forecasts because analysts had been looking for about $1.68 in 2025 EPS and $2.8 billion in revenue​.

So with analysts expectations failing to be met, why the pop in GEO?

Management was quick to explain that the 2025 guidance is conservative because it excludes any yet-to-be-finalized new contracts. That is the key line that astute investors spotted.

Consistent with GEO’s usual practice, the forecast doesn’t assume wins of new business that hadn’t been announced by the time of guidance issuance​. Importantly, GEO hinted that this baseline outlook could prove too low. The company stated it “anticipate[s] several additional opportunities [that] could materialize during the year, which would provide significant upside to our current forecast”​

You don’t have to read between the lines too much to see that the leadership team expects to land more contracts in 2025 versus what is baked into guidance, and they will raise their projections as those materialize.

So What’s The Takeaway?

The real 2025 results are likely to beat the initial guidance if things go as hinted, meaning that investors have a reason to look past the seemingly weak numbers and focus on potential growth ahead.

To highlight that upside potential, management simultaneously announced a major 15-year contract with U.S. Immigration and Customs Enforcement (ICE) on the day of the earnings release.

The company won a deal to reactivate and provide services at its 1,000-bed Delaney Hall facility in New Jersey as a federal immigration processing center​. This long-term contract is expected to generate over $60 million in annual revenue once the facility is fully operational, with total contract value estimated around $1 billion over 15 years​.

GEO thinks it will be able to bring the center online by Q2 2025 and see revenue contributions ramping in the second half of 2025​.

The key point here is that this ballpark billion dollar contract was not included in the initial 2025 guidance (because it was just announced), meaning the $2.5 billion revenue outlook could prove low once Delaney Hall’s contribution is added.

The deal was clearly a positive surprise and reinforced management’s narrative that significant growth opportunities are unfolding.

GEO’s leadership struck an upbeat tone during the call. Executive Chairman George Zoley highlighted that the company is “continuing to prepare for what we believe is an unprecedented opportunity” to assist the federal government with expanded immigration enforcement needs​.

He emphasized the proactive steps GEO is taking, including a previously announced $70 million investment in facility renovations, transportation assets, and electronic monitoring capacity, to ensure it can meet rising demand from ICE and other agencies​. It seems clear as can be that GEO sees the current environment as a turning point where its services will be in greater need, and it is gearing up accordingly.

Is GEO Balance Sheet Safe?

GEO is weighed down with a heavy debt load but the top brass seems intent on paying this down aggressively. Management reiterated plans to reduce net debt by $150–$175 million in 2025, which would bring net debt to roughly $1.55 billion​.

Better sill, Zoley mentioned the company is exploring options to return capital to shareholders in the future once its balance sheet is in better shape​, hinting that GEO could consider reinstating a dividend or share buybacks down the road – GEO eliminated its dividend a couple of years ago following a restructuring.

With the possibility of future dividend income on the horizon, investors have been buoyed by the potential of income investors coming back to the stock too.

Overall, it seemed like management was announcing an inflection point for the company after a challenging year. The combination of a conservative baseline outlook with clear drivers for upside due to new contracts, cost controls, and debt reduction, appears to have ignited investor optimism. What started as a disappointing earnings miss story quickly transformed into a bullish forward-looking story in the eyes of the market.

How High Could GEO Stock Go?

Given that the consensus of analysts estimates was $37 per share prior to the announcement, it seems clear that $40 is well within reach because none of the analysts had factored in the new billion dollar contract.

The ICE contract announcement is a game-changer and provides a significant, long-term boost to GEO’s revenue starting this year​.

Analysts now need recalculate the company’s earnings potential with an extra $60+ million per year in high-margin revenue on the way. This contract also validates GEO’s strategy to invest in expanding capacity – a sign that those investments are yielding results.