Companies' stock soar after slashing workforce

People seeking employment wait in line to enter a job fair at the Arena Stage at the Mead Center for American Theater March 28, 2014 in Washington.
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People seeking employment wait in line to enter a job fair at the Arena Stage at the Mead Center for American Theater March 28, 2014 in Washington.

Companies looking for a way to please Wall Street and get their stock prices up have a solution: fire employees.

There are 14 companies in the Standard & Poor's 500, including office equipment maker Pitney Bowes, defense contractor Lockheed Martin and grocer Safeway, that have methodically eliminated jobs each and every year for the past five fiscal years. And these stocks are outperforming the market both in the short term and long term.

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Shares of these chronic job cutters, on average, are up 18.8% over the past twelve months. That tops the 15.5% gain by the Standard & Poor's 500 during the same time period. And over the past five years, the job cutters are beating the market by an even wider margin, gaining an average 269% while the S&P 500 is up 103%.

Below is a list of the five companies that not only reported a smaller workforce each out of the past five years, but that also cut the largest percentage of employees over the past five years (the full list of the 14 chronic job cutters is at the bottom of this post):

% Headcount reduction
past 5 yrs
Stock price % ch.
past five years
Motorola Solutions MSI -67.20% 50.30%
Macerich MAC -64.60% 248%
General Growth GGP -57.10% 2429.70%
Apartment Investment AIV -57.10% 249.80%
Pitney Bowes PBI -54.20% 12.90%
Source: S&P Capital IQ, USA TODAY research

Some of the job reductions may not necessarily be the result of firing workers, but rather restructuring and divestitures. But the fact is that Wall Street says it's looking for companies that are growing and investing, yet it's rewarding companies that are doing the opposite when it comes to the size of their workforce.

The biggest stock gainer from reducing jobs this year is Pitney Bowes. The company has slashed its workforce in half to 16,100 in the most recent annual report from 35,140 five years ago. Most of the big cuts came in 2013, when the workforce was cut by 41%. But over the past twelve months, shares of the company are up 73%.

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Defense contractors Lockheed Martin and Northrop Grumman have also been persistent job cutters. Lockheed Martin, for instance, has taken its workforce down 21% over the past five years, including a 4.2% cut in the latest fiscal year. But investors have pushed shares up 60% over the past twelve months.

It's not just a theory. Shares of struggling office supply store Office Depot soared 16% Tuesday to $4.82 after announcing plans to shutter 400 stores, having an untold negative effect on jobs.

How the S&P 500 companies that reported a lower number of employees in each and every of the past five fiscal years are performing over the past 12 months:

Employee % ch. latest year
Stock price % ch.
since 5/6/2013
Pitney Bowes PBI -41.20% 72.90%
Lockheed Martin LMT -4.20% 60%
Northrop Grumman NOC -4.10% 55.20%
Safeway SWY -19.30% 43.90%
NextEra Energy NEE -3.50% 21.40%
Hartford Financial HIG -16.40% 20.5
Motorola Solutions MSI -4.50% 16.60%
Wisconsin Energy WEC -4.50% 16.60%
Apartment Investment AIV -10.10% 1%
General Growth GGP -10.20% -1.30%
Macerich MAC -13.20% -8.20%
Verizon VZ -3.60% -8.80%
Staples SPLS -4.20% -9.00%
Pinnacle West Capital PNW -2.70% -9.70%
Source: S&P Capital IQ, USA TODAY research

By Matt Krantz of USA Today



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