Layoffs 2024: 3 Stocks That Ought to Copy Tesla’s Job Cuts

InvestorPlace04-23

These three companies should start or accelerate layoffs. Expeditors International of Washington (EXPD): Analysts rate it a big sell. Illinois Tool Works (ITW): The headcount has remained the same ...

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What, specifically, are these areas of overlap and redundancy? We won’t know until the cuts are made. \nIn the meantime, plenty of other companies in the S&P 500 could use a little downsizing. \nWhile I’ve never been a fan of overhiring or overfiring, sometimes you overshoot, requiring a rightsizing to balance expenses with growth. \nHere are three that stand out for me.  \nExpeditors International of Washington (EXPD)\nSource: Travel mania / Shutterstock.comExpeditors International of Washington (NYSE:EXPD) isn’t an obvious candidate for job cuts. It makes money, and its shares have been up 45% for the past five years. While that doesn’t compare to the 70% gain for the index, at least it’s in positive territory. \nThe big issue for the Seattle-based logistics company is that its revenues and profits are cratering. \nIn Q4 2023, its revenues dropped 34% to $2.3 billion, while its operating income fell 40% to $199 million, an operating margin of 8.7%. That’s 140 basis points less than TFI International (NYSE:TFII), a Canadian logistics and transportation company. \nExpeditors finished 2023 with 18,000 employees. Five years ago, it had the same number of employees and about the same revenue and operating income as this past year. \nAll its growth vanished in 2023. \nNo wonder none of the 17 analysts covering its stock have a Buy rating, while nine believe it’s a Sell, with a target price of $108.50, below where it’s currently trading.    \nAs for TFII, 16 of the 20 analysts rate it a Buy. The cream always rises to the top.     \nIllinois Tool Works (ITW)\nSource: Casimiro PT / Shutterstock.comIllinois Tool Works (NYSE:ITW), like Expeditors, isn’t an obvious candidate for job cuts. \nAlthough its revenue has fallen by 10% over the past decade, its operating profits and margins have improved dramatically. As a result, its earnings per share of $9.74 in 2023 is 3x higher than in 2012, a compound annual growth rate of 16.8%.\nWhat’s the problem, you might ask? If you compare its stock’s performance over the past five years, it’s underperformed by 150 percentage points relative to GE Aerospace (NYSE:GE). Kudos to GE CEO Larry Culp for turning something awful into something valuable. It wasn’t easy. \nAccording to the Liberated Stock Trader, ITW has 46,000 employees in 2024. The company’s 10-K doesn’t say how many. However, the proxy says it was 45,000 at the end of December, with two-thirds outside the U.S. In 2019, it was also 45,000. \nThe board will note that margins have improved significantly over the past decade and that ITW has a 10-year annualized total return of 13.02%. However, the majority of the gains came between 2012 and 2017 (up 269% through January 2018), compared to 45% from January 2018 through April 2024. \nIf you’re not increasing your employee headcount, you’re really not growing. It’s better to sell off the least-performing businesses, as GE did, and become less of a conglomerate. Investors will pay up for that. \nWalgreens Boots Alliance (WBA)\nSource: Mahmoud Suhail / Shutterstock.comIn the introduction, I said I would only include companies from the S&P 500. And even though Walgreens Boots Alliance (NASDAQ:WBA) was booted from the index in February—Amazon (NASDAQ:AMZN) replaced it—it has become bloated with way too much overhead beyond any reasonable justification. \nAccording to the Liberated Stock Trader, Walgreens had 325,000 employees at the beginning of January. The company’s 10-K (Aug. 31, 2023, is the latest fiscal year) put the number at 331,000, with 38% part-time working 30 hours or less weekly. \nWell, the company is doing layoffs — InvestorPlace’s William White reported on April 18 that the company was cutting staff from its Chicago facility and reducing the hours for employees in the stores by 4-7% — and has been for months, it can’t cut deep enough to deliver shareholder value. \nI was a fan of the former CEO, Roz Brewer, who joined the company in March 2021 but stepped down last September. The company’s move into healthcare wasn’t where Brewer wanted to go with the company. She and the board appear to have agreed to disagree. That’s merely my speculation on the matter.       \nAt the time of her departure, I suggested three possible candidates to replace her–the former CEO of pharmacy benefits management company Express Scripts.  \nWhile it’s a decent hire, WBA needs to cut more fat from the top down. I guess we’ll see.   \nOn the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.\nWill Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. 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