One of the biggest stories on Wall Street this week will be at CSX Corporation (Nasdaq: CSX), where the company is mourning the sudden death of CEO Hunter Harrison.
CSX stock had been a big winner in 2017 on Harrison’s turnaround plan for the railroad, but dipped badly on Friday after CSX announced that the 73-year-old Harrison was taking a medical leave.
On Saturday, CSX announced that Harrison died from “unexpectedly severe complications” from his illness.
“With the passing of Hunter Harrison, CSX has suffered a major loss,” CSX chairman Edward Kelly says in a statement. “Notwithstanding that loss, the board is confident that Jim Foote, as acting chief executive officer, and the rest of the CSX team will capitalize on the changes that Hunter has made.”
Harrison took over as CEO in March and immediately began implementing a restructuring plan centered on improving business efficiencies, cutting costs and increasing profits. Harrison had previously had tremendous success improving the businesses of Canadian National Railway (CNI) and Canadian Pacific Railway (CP).
Investors had high hopes that Harrison would be able to work his magic again at CSX, and the railroad’s stock was up more than 60 percent in 2017 prior to Friday.
In a conference call on Friday, Foote said the company is still fully committed to Harrison’s plan. “My thoughts are totally consistent with everything that Hunter and CSX have said to date about what we intend to do,” Foote said.
However, investors aren’t so certain about CSX’s future without Harrison. CSX stockplummeted 7.6 percent on Friday, and Morningstar analyst Keith Schoonmaker says investors can expect even more downside for the stock following news of Harrison’s passing.
“We reduced our fair value estimate Friday to $51 from $54 as we incorporated slower operating ratio improvement than we assumed prior to the announcement of his medical leave,” Schoonmaker says. “We expect the market to punish shares even more severely than Friday’s 7.6 percent decline.”
Barclays says the market is unlikely to give CSX the benefit of the doubt without Harrison steering the ship.
“Without Mr. Harrison in an active role, we expect the market to take a much more cautious approach on CSX shares, likely to capitalise improvement only once demonstrated in company results,” Barclays analysts say in a report cited by the Financial Times.
For now, investors’ hopes lie…
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