CXW

Earnings Date: 03-May-07 BMO

Ticker: CXW

Company: Corrections Corp. of America

Industry: Property Management

Competitor: The Geo Group, Inc. (GEO)

Summary: Corrections Corporation of America is an owner and operator of privatized correctional and detention facilities, and a prison operator in the United States. As of February 27, 2007, the Company operated 64 correctional, detention and juvenile facilities, including 40 facilities that it owns, with a total design capacity of approximately 72,000 beds in 19 states and the District of Columbia. It also owns three additional correctional facilities that it leases to third-party operators. In addition to providing the fundamental residential services relating to inmates, its facilities offer a variety of rehabilitation and educational programs, including basic education, religious services, life skills and employment training, and substance abuse treatment. It also provides healthcare, food services, and work and recreational programs. The Company also provides prisoner transportation services for governmental agencies through its wholly owned subsidiary, TransCor America, LLC.

Gapping Analysis:

Date	Quarter	Gap ($)	Intraday	Beats(Misses)
08-Feb-07	2007Q1	$2.29	$1.25	$0.08
06-Nov-06	2006Q4	$1.23	$1.00	$0.02
03-Aug-06	2006Q3	$0.96	$1.89	$0.04
03-May-06	2006Q2	$1.04	$1.20	$0.04
09-Feb-06	2006Q1	$0.13	$1.42	$0.04
03-Nov-05	2005Q4	$0.18	$1.00	$0.02
04-Aug-05	2005Q3	($0.07)	$0.11	($0.01)
05-May-05	2005Q2	($0.12)	($0.30)	$0.01

Technical Analysis: 1-year and all-years chart are both uptrend.

Average Daily Volume: 402K

Pivot Point Analysis:

R3	$64.80
R2	$61.40
R1	$59.10
PV	$55.70
S1	$53.40
S2	$50.00
S3	$47.70

Fundamental Analysis: MSN rating is 7. Last price is $57.50, target FY end is $67.93 (5 Anaylsts: High) . Debt/Equity ratio is 0.93, lower than industry of 2.03. ROE = 10.60%. ROA = 4.80%. Profit margin = 7.90%.

Insider Trading: No insider purchase for past 52-weeks. Insider selling for past 52-weeks is more than previous 52-weeks.

Short Ratio: 3.4

IV: 37.88%

News: (19-Jan-07) Co announces it has received a contract award from the Federal Bureau of Prisons to house up to 1,558 federal inmates at the co’s Eden Detention Center in Eden, Texas. The co currently houses approx 1,300 BOP inmates at the Eden facility, under an existing Inter-Governmental Services Agreement between the B.O.P and the City of Eden. The contract requires a renovation of the Eden facility, which will result in an additional 129 beds. Upon completion, the Eden facility will have a rated capacity of 1,354 beds. Renovation of the Eden facility is expected to be completed in February 2008 at an estimated cost of $20.1 mln.

The contract, awarded as part of the Criminal Alien Requirement Phase 6 Solicitation (“CAR 6″), becomes effective May 1, 2007 and has an initial four-year term with three two-year renewal options. Under the new CAR 6 contract, the Company will receive a fixed monthly payment based on a guaranteed population equal to 90% of the current rated capacity and a per diem payment for each additional inmate thereafter. Following completion of the renovation, the fixed monthly payment will be adjusted to 90% of the new rated capacity beds and a per diem payment for each additional inmate thereafter. Under the provisions of the award, the Company could earn revenues of up to approximately $119.6 million during the initial four-year term of the contract.

Conclusion: CXW has very positive gapping history. Only concern is that it’s at the top of the price channel. It’s competitor, GEO, announced earnings data today. Beats analysts’ estimate but guided lower. Expect CXW not to guide lower as the new contract it was awarded becomes effective in 1-May-07, which means the new facility would be able to contribute to the revenue with immediate effect.

Position: BTO 3 May 60 Call @ $0.80

Results: Reports Q1 (Mar) earnings of $0.52 per share, $0.06 better than the Reuters Estimates consensus of $0.46; revenues rose 11.5% year/year to $350.9 mln vs the $345.1 mln consensus. Co issues in-line guidance for Q2, sees EPS of $0.48-0.52 vs. $0.50 consensus. Co raises guidance for FY07, sees EPS of $1.97-2.07 vs. $2.04 consensus, up from previous of $1.95-2.05.