Union Pacific (UNP) on Sunday announced a management shakeup on Sunday, after a hedge fund owner demanded changes in leadership. The move comes as railway stocks kept losses to a minimum in February though Southern Norfolk (National Security Council) disaster in Ohio. Union Pacific stock rose on Monday.
Soroban Capital Partners on Sunday publicly called for the ouster of the rail chief executive, Lance Fritz. A letter from a New York hedge fund predicted that the change to “best-in-class” leadership would double Union Pacific’s share price over the next two years.
Soroban forecast Union Pacific’s earnings per share will be $18 in 2025. That would represent 59% growth in earnings per share compared to 2022. It’s also 24% more than analysts’ 2025 estimate of $14.46 per share, according to FactSet.
Soroban favored former Chief Operating Officer Jim Vena for the role. The hedge fund says it owns a $1.6 billion stake in UNP — about 0.76% of UNP’s extraordinary shares, according to FactSet.
“Unlike typical shareholder engagements that come with many demands, Soroban has only one request – to install new leadership that can make the trains run safely and on time,” the letter read.
Union Pacific replied Sunday. The company said the board will actively search for a new CEO who “will take over in 2023.”
“Union Pacific has been my home for 22 years, and I am confident now is the right time for Union Pacific’s next captain to take the helm,” Fritz said in a statement. “I look forward to working with the Board of Directors as we identify the next CEO to lead the company into the future.”
Union Pacific stock redemption support
Union Pacific stock rose 9.4% to 210.88 during market hours Monday. This puts UNP stocks back above its 200-day moving average, and it also broke above the downtrend line.
On the industrial front, investors appear to be still holding on to railroad stocks despite the derailment of the Norfolk Southern train in February in East Palestine, about 50 miles northeast of Pittsburgh.
In early February, a Norfolk Southern Railroad train of 150, which was transporting hazardous materials, derailed as it passed through the eastern town of Ohio in East Palestine. Five of the cars that derailed in eastern Palestine were carrying the chemical vinyl chloride, a type of gas.
There are reports of animals falling ill, dead fish appearing in the waterways and residents suffering from burning eyes.
The Environmental Protection Agency stops shipments of waste to eastern Palestine
On Sunday, the US Environmental Protection Agency (EPA) ordered Norfolk Southern to stop shipping hazardous waste from the accident site until officials can review the routes and destinations of the hazardous chemicals. The EPA notes that hazardous materials “have been and continue to be released into the air, topsoil, and surface waters.”
Norfolk Southern Railroad fell 6.5% in February while Union Pacific stock rose 4.7% after Monday’s early rally. CSX (CSX) effectively flat, down 0.5%.
Among the railways in Canada, Canadian Pacific (C.P) lost 1.6% during the month, while Canadian National Railway (CNI) decreased by 2.1%. Generally, IBD’s rail and transport industry group It’s down about 1.7% over the year, according to MarketSmith Analysis.
Please follow Kit Norton on Twitter @tweet for more coverage.
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