America's hiring, and that's supposedly a positive for the economy. But investors are punishing shares of S&P 500 companies adding the most employees.
Shares of the 10 S&P 500 companies that reported the biggest jumps in headcount last year, including health care company Moderna, consumer discretionary Etsy and semiconductor firm EPAM System, are down an average 8.3% this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's even worse than the S&P 500's 5.3% decline this year.
And looking deeper you'll find even more discontent with the S&P 500 companies aggressively adding to their workforces. Seven out of 10 of them are down 10% or more this year. So much for hiring being a sign of bullishness on the future.
"The labor market remains strong and employers are making progress filling vacancies," said Edward Moya, strategist at Oanda. But the report "also showed inflation is getting uglier and activity is slowing as supply chain issues persist. Inflation pressures could soon lead to demand destruction so it might be hard to see equities remain upbeat as U.S. consumers start to drain their savings."
Who's Hiring In The S&P 500
Companies are now reporting their full-time employee headcounts for 2021. And overall, they're hiring and adding people at a strong clip.
So far, more than 80% of the companies in the S&P 500 reported their employee total for 2021. And a majority of those, 61%, report increasing the number of full-time employees. And of those, more than 40% boosted their rolls by 10% or more. Keep in mind, though, companies don't just add employees by hiring them. They might also expand by buying another company and folding its employees in.
But investors don't seem to be valuing companies expansions, at least this year so far.
Big Bumps In Employees
Moderna is the best example of the trend. The fast-growing maker of high-tech vaccines more than doubled its headcount in 2021 to 2,700 employees. But is it expanding as it's feeling rich coming off a banner 2021?
The company is looking to expand to take advantage of the huge strides in mRNA technology for a number of treatments. But it's ramping up on employees, just as profit is seen falling. Analysts say profit will skid nearly 3% in 2022 and drop more than 60% in 2023.
So despite a massive jump in people working at the company, shares are down by roughly a third this year.
It's a similar story at Etsy, a leader in online craft selling. The company reported a nearly 70% jump in its headcount to 2,402 full-time people in 2021. It, too, is coming off a strong 2021 where many people logged into Etsy to buy and sell handcrafted goods. But profit this year isn't likely to match up. Analysts think profit will fall more than 2% in 2022. And the shares? They're off more than 40% this year.
Enphase: The Exception To The Rule
If there's one glaring exception, it's of well-run high-tech energy firm Enphase Energy. The company's shares are up more than 12% this year. And that's following the firm's 166% jump in full-time employees in 2021.
But there's one difference. Enphase isn't straight-up hiring many of these new workers. It's picking them up in acquisitions. The company bought four smaller energy firms in 202, bringing their employees into the Enphase orbit. So unlike Etsy and Moderna, Enphase's profit is seen jumping 31% this year and another 30% next year.
And that's the point. Investors will tolerate S&P 500 companies going on hiring binges, but only if they post the profit growth to back it up.
S&P 500 Companies Adding The Most Employees In 2021
Their shares are underperforming the market, on average, this year
| Company | Symbol | Employees 2021 | % ch. employees in 2021 | Stock % ch. YTD | Sector |
|---|---|---|---|---|---|
| Enphase Energy | 2,260 | 165.9% | 12.5% | Information Technology | |
| Moderna | 2,700 | 107.7 | -30.5 | Health Care | |
| Humana | 95,500 | 96.1 | -4.8 | Health Care | |
| Coterra Energy | 936 | 86.1 | 42.6 | Energy | |
| Realty Income | 367 | 76.4 | -1.0 | Real Estate | |
| International Flavors & Fragrances | 24,000 | 75.2 | -10.8 | Materials | |
| Etsy | 2,402 | 69.9 | -42 | Consumer Discretionary | |
| Thermo Fisher Scientific | 130,000 | 62.5 | -11.2 | Health Care | |
| NRG Energy | 6,635 | 61.7 | -10.9 | Utilities | |
| SVB Financial | 6,567 | 47.2 | -19.2 | Financials |
