Private prison stocks Corrections Corp. Of America (CXW) and Geo Group (GEO) plunged Thursday after reports that the Justice Department plans to end its reliance on the industry, arguing that private facilities "simply do not provide the same level of correctional services."

DOJ ENDING USE OF PRIVATE PRISONS: The Washington Post's Matt Zapotosky revealed Thursday afternoon that Deputy Attorney General Sally Yates issued a memo instructing Department officials to either stop renewing or "substantially reduce" the scope of contracts with private prison operators, with the goal being "reducing -- and ultimately ending -- our use of privately operated prisons." Yates contended that "they simply do not provide the same level of correctional services, programs, and resources; they do not save substantially on costs; and as noted in a recent report by the Department's Office of Inspector General, they do not maintain the same level of safety and security." Speaking in an interview with the Post, Yates said DOJ and Bureau of Prisons officials discussed the matter for months, though she cautioned that existing contracts would not terminate overnight. In a press release issued soon after the news broke, Yates confirmed the memo and explained that as, a result of declining prison populations brought on by the Department's move towards proportional sentencing, the agency now has an opportunity to "better allocate our resources."

POTENTIAL REVENUE IMPACT: In Geo's second quarter regulatory filing, the company reported that its U.S. Corrections & Detention business represented $341.6M of its $548.4M revenue total, or about 62%. Corrections Corp., meanwhile, last reported that its owned and managed facilities accounted for $401.9M of its $453.3M revenue total, representing nearly 89% of total sales.

INVESTORS WEIGH ARAMARK'S EXPOSURE: Aramark (ARMK), which is also seeing slight weakness after today's news, reported that sales to sports, leisure and corrections groups comprised 25% of its "Food and Support Services North America" business segment for Q2, which itself accounted for more than 69% of the company's total revenue.

PRICE ACTION: Shares of Geo have crashed 39% to $19.80 in afternoon trading, while Corrections Corp. is down 45% to $15.06. Aramark is down 14c to $37.13.