Another week, another round of layoffs; this time Meta Platforms Inc. is adding thousands more to the 11,000 employees it let go in November, according to Bloomberg News.
Which industries might be looking to lay off more employees even after the tens of thousands of layoffs we’ve seen in recent months? According to an analysis of earnings and stock performance, the financial and healthcare industries hold the key.
Here’s how I arrived at that conclusion. There are 105 companies in the S&P 500 whose revenue per employee, or the average amount of revenue produced by each person, has fallen from pre-pandemic levels, or as of 2019.
That serves as a reasonable indicator of how effectively a business is managed. It indicates that either sales have decreased or management hired new employees more quickly than it could grow the company, outpacing sales growth.
Almost 60 of the 105 equities have performed better than the general market
Almost 60 of the 105 equities have performed better than the general market during the past 12 months. One can draw the conclusion from this that the leadership team is under less pressure to turn the company around and increase profitability. Of course, that won’t always be the case.
45 stock left
Because of its previous layoffs, Meta has performed better than the S&P 500, but that doesn’t seem to be deterring Chief Executive Officer Mark Zuckerberg from eliminating more positions.
After excluding such companies, there are 45 stocks left, all of which are underperforming the market as a whole and have diminishing sales per employee. The 12 financial companies make up the largest cohort within that group, followed by the 10 healthcare companies.
A few of the well-known names are the Minneapolis-based Medtronic and the banking giants Bank of America and Citigroup, each of which have hundreds of thousands of employees.
The fact that those two industries are overrepresented on my list compared to the weight they have in the S&P 500 isn’t solely due to their over presence in the index as a whole.
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