Shares of Union Pacific (UNP) are on the rise after the railroad company named industry veteran Jim Vena as its Chief Operating Officer. The move prompted upgrades to buy-equivalent ratings by several Wall Street firms, including RBC Capital, Cowen and Seaport Global.
UNION PACIFIC NAMES JIM VENA AS COO: On Monday, Union Pacific said it had named Jim Vena as its COO, effective January 14. He served as executive vice president and COO at Canadian National (CNI) until retiring in June 2016. Vena will lead all aspects of Union Pacific's operations, including Unified Plan 2020 implementation, the company's new operating plan that launched in October 2018. He will report to Lance Fritz, Union Pacific chairman, president and CEO. Vena worked with the late Hunter Harrison, who pioneered a strategy called “precision scheduling railroading” to make railroads operations more efficiently and profitable. Harrison used the strategy to steer turnarounds at railroads including Canadian National Railway, and Vena played a key role in implementing the plan at the Canadian company.
BUY UNION PACIFIC: After Union Pacific announced that it had hired Jim Vena as COO to help implement precision scheduled railroading, Seaport Global analyst Mark Levin upgraded the stock to Buy from Neutral, with a $165 price target. "While Vena may not be Hunter Harrison," his addition at Union Pacific significantly increases the likelihood of a successful transformation to PSR, Levin contended. The analyst argued that greater investor confidence that the railroad company will eventually reach a 55%-60% operating ratio should help propel the stock. Meanwhile, his peer at RBC Capital also raised his rating for Union Pacific to Outperform from Sector Perform. Analyst Walter Spracklin told investors in a research note of his own that he expects the stock price to react positively as the PSR implementation gets “an important boost” with Vena. Spracklin added that the appointment should give investors a “line of sight to major operation change” to the company, and raised his price target on the shares to $179 from $151. Cowen analyst Jason Seidl also upgraded Union Pacific to Outperform from Market Perform following the announcement as it gives him more confidence in the company's ability to successfully implement its version of PSR. Further, the analyst told investors that he expects the results to meaningfully take hold in the second half of 2019. Seidl raised his price target on the stock to $178 from $153. While reiterating an Overweight rating and a $170 price target on the stock, Stephens analyst Justin Long said he also views the hiring positively and believes it will help ease concerns of those who were skeptical about Union's ability to successfully execute its new plan. Long reiterated Union Pacific as his 2019 Best Idea.
PRICE ACTION: In afternoon trading, shares of Union Pacific have gained about 8% to $150.18.
Canadian National
+0.48 (+0.62%)
Union Pacific
+11.93 (+8.61%)