Lehman Cuts Cornell to 'Buy'

Analyst Jeffery Kessler says the company's rival won a lucrative federal prisons contract

Lehman Brothers downgraded Cornell Cos. (CRN ) to buy from strong buy.

Analyst Jeffrey Kessler says rival Corrections Corp. of America won a contract with the Federal Bureau of Prisons -- a three-year, $109 million deal to house 1,500 federal innmates in its Georgia facility. Kessler says there's no second 1,500-bed award being allocated at this time, as was hoped by Cornell management.

The company will now have to depend on near-term growth from the hoped-for federal detention facilities for aliens, and possible approval of a state facility in Alaska. This is a definite psychological damper for investors, following a tough period in which the company brought back a synthetic lease structure it set up on its balance sheet.

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