The Federal Bureau of Prisons has not renewed its contract with  Corrections Corp. of America to manage more than 2,000 inmates now housed in California under the Criminal Alien Requirement program.

The contract, which has been awarded to Cornell Cos., will take about $22 million annually – about 12 cents per diluted share – off CCA's bottom line, estimated Avondale Partners analyst Kevin Campbell. Nashville-based CCA – which did get a renewed BOP deal to manage 1,200 inmates in New Mexico – had been expected to earn $1.40 per share in 2010.

In a statement, CCA President and CEO Damon Hininger said the company believes the BOP's move is based primarily on "escalating federal wage determination costs in California, and does not reflect the quality of operations our company and staff have provided to the BOP."

In a note to clients, Campbell wrote that the wage differential between California and Georgia, where Cornell will house the CAR inmates, is more than 50 percent. Campbell also noted that CCA's facility in California City, Calif., will likely find a new use relatively quickly.

"While the loss is a near-term negative for CXW, the company can market the beds to the California Department of Corrections & Rehabilitation (CDCR), which has sufficient demand," he wrote.

Campbell said investors should consider buying CCA shares (Ticker: CXW) if they drop in the short term even though he has lowered his price target to $28 from $30. In the first minutes of trading Wednesday, CCA was down about 1.8 percent at $23.44.