© Reuters. FILE PHOTO: The Union Pacific livery on the side of a freight locomotive is displayed ahead of a possible strike if there is no deal with rail workers’ unions, at Union Station in Los Angeles, California, U.S., September 15, 2022. REUTERS/Bing Kettle
By Nathan Gomez
(Reuters) – Shares of Pacific Union Corp (NYSE:) rose nearly 10% in early trading on Monday, a day after the US rail operator announced that Chief Executive Lance Fritz would step down this year amid pressure from the investor Soroban Capital Partners.
The gains, putting the shares on track for their biggest gain since March 2020, come after some Wall Street analysts backed a leadership change at the company that has struggled with labor shortages and service issues. . Union Pacific shares have fallen more than 25% in the past 10 months.
Soroban, who owns a stake of about $1.6 billion in Union Pacific, urged the company on Sunday to consider its former chief operating officer Jim Vena for the job, a choice that was endorsed by brokerage BMO Capital Markets.
Vena, who serves as a member of the board of directors of FedEx Corp (NYSE:), was previously considered as a candidate to lead Canadian National Railway (TSX:) Co.
“We believe Vena may be uniquely positioned to instill a strong operating culture at UNP and position the company to capitalize on the volume growth opportunities available across its network,” BMO’s Fadi Chamoun said in a note.
Other analysts said new leadership has the potential to improve the company’s operating ratio, a key profitability metric.
The Omaha-Nebraska-based company has faced severe criticism over the past year from customers and the Surface Transportation Board (STB) for rail service and shipping delays.
“We believe that (Union Pacific’s) underperformance compared to its peers warrants a management shakeup, and we see Vena as the most logical successor,” said Jason Seidl, an analyst at Cowen.
In its most recent quarter, the company noted higher operating expenses caused by operating inefficiencies and the current economic environment affecting its revenue growth.