What PayPal and 26 other companies said about layoffs this year

Consider the investment banking giant Goldman Sachs Group (Stock ticker: GS). CFO Dennis Coleman said Jan. 23 while discussing fourth-quarter earnings that the bank had cut staff earlier this year, laying off 3,200 employees, and “we expect to benefit in 2023 north of $200 million related with that.” ”

The credit bureau firm, Equifax (EFX), said on Feb. 9 that it plans to cut more than 10% of its employees and contractors in 2023. The measures will, among other things, cut spending estimated at about $200 million in 2023, he said. CEO Mark Bigor.

Among technology companies, Western Digital CEO David Goeckler said last month that the hard drive vendor has cut its quarterly adjusted operating expenses by more than $100 million since the end of fiscal 2022 by cutting staff among other measures.

Snap (SNAP) said it continues to wind down various operations to capture $450 million in cost base. Chief Financial Officer Derek Andersen said investors will see the full benefit of that cut in the first quarter, which ends in March, citing the current headcount reduction, down 20% from the peak in the second quarter.

PayPal Holdings (PYPL), a financial technology company, said last week that it had identified an additional $600 million in cost savings for 2023 on top of the $1.3 billion previously planned due to the “very difficult decision to reduce our headcount by 7% as we continue to improve our operations.” .

Other companies on the list of about 27 health care companies include Baxter International (BAX) and News Corp (NWSA), owner of Barron And The Wall Street JournalMarsh & McLennan (MMC), insurance brokerage

These are just the companies that have talked about layoffs in their earnings calls. Generally some 380 Companies have laid off employees this year only in the tech industry, according to Layoffs.fyi, though not all companies discuss the benefits to the bottom line. spotify technology (spot)
And

For example, he declined to say how much savings from people cuts when asked by an analyst on a fourth-quarter call to discuss earnings. The music streaming service announced plans to cut about 6% of its workforce across the company in January.

Sadly, for technology employees specifically, more layoffs may occur, according to Savita Subramanian, chief US equity and quantum strategist at BofA Global Research. Technology has more costs to bring down, Subramanian said, in a note this month, given a 20% increase in employment over the past three years.

She noted that this is “very high relative to real sales growth”. “Technology is still very bloated even after layoffs.”

The BofA calculated that the announced layoffs would represent an estimated operating increase of 1.7 percentage points, which is defined as cost savings as a percentage of 2022 sales for growth companies.

Lower costs can be great drivers of profits and revenue. Cost-saving advertising can satisfy investors, even if these companies’ fundamentals generally worsen.

For example, despite the broader announcement pullback, investors cheered Meta Platform (META) stocks. In part, that’s due to CEO Mark Zuckerberg lowering its capital spending forecast and telling analysts that the company will remove some layers of middle management. Definition stocks are up 44% this year.

Outside of technology, FedEx

Stock (FDX) was recently promoted by both Citi analyst Christian Wetherbee and BofA Securities analyst Ken Hoexter to buy from hold due to growing signs of cost control despite lower freight volumes due to the weak economy. The logistics company announced a plan to reduce the number of department heads by 10%. Hoexter estimates quarterly earnings per share at 40 cents. The stock is up 22% this year.

“The clue to the game has been easy on Wall Street this earnings season,” said Edward Moya, chief market analyst at brokerage OANDA. Barron. “Announce cost-saving measures and layoffs, and your share price will go up.”

If only it were that easy for the workers.

Write to Karishma Vanjani at [email protected]