(Reuters) – Shares of Union Pacific Corp surged nearly 10% before the bell on Monday, a day after the U.S. railroad operator announced that its Chief Executive Lance Fritz would step down this year amid pressure from investor Soroban Capital Partners.
The gains came after some Wall Street analysts backed the leadership change at the company, which has struggled with labor shortages and service issues. Union Pacific’s shares have dropped more than 25% over the past 10 months.
Soroban, which owns an about $1.6 billion stake in Union Pacific, urged the company on Sunday to consider its former chief operating officer Jim Vena for the role — a choice that was backed by brokerage BMO Capital Markets.
Vena, who serves as a board member at FedEx Corp, was previously considered as a candidate to lead Canadian National Railway Co.
“We believe that 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 throughout its network,” BMO’s Fadi Chamoun said in a note.
Other analysts said a 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) over rail service and shipping delays.
“Given the ongoing challenges at UNP, a change will likely be viewed favorably,” Wells Fargo Analyst Allison Poliniak-Cusic said.
In its most-recent quarter, the company flagged higher operating expenses caused by operational inefficiencies and the current economic environment hitting its revenue growth.
(Reporting by Nathan Gomes in Bengaluru; editing by Uttaresh Venkateshwaran)
