CSX falls on CEO death; investors seek turnaround clarity

By Rachit VatsStocksReuters

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(Reuters) - CSX Corp’s (NASDAQ:CSX) shares slipped more than 5 percent on Monday on news of Chief Executive Hunter Harrison’s death, leaving investors worried about the No.3 U.S. railroad’s turnaround plan under acting CEO Jim Foote.

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Harrison, 73, a railway icon known for turning around railroad companies, was in the midst of an overhaul to boost profits at CSX, where he joined in March this year.

CSX Chairman Edward Kelly said Harrison’s death was due to unexpectedly severe complications from a recent illness, calling it a major loss to the company.

The railroad company brushed off questions about whether the board had been slow to disclose Harrison’s health problems.

Seen using an oxygen tank when meeting investors last month, Harrison’s sudden medical leave was announced by the company on Thursday, sending its shares down about 10 percent on Friday.

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In November, Harrison stopped short of laying out a succession plan for the company but said he was “trying to stay back a little bit” to give his management team space to steer through a major operations overhaul.

Acting CEO Foote has been with the company for just about two months, but is known to be well-versed with late Harrison’s working style from a previous job.

“CSX must press forward in executing Hunter’s turnaround plan under acting CEO Jim Foote, despite his less than two-month tenure,” Susquehanna Financial Group analyst Bascome Majors said in a note.

“The board’s greatest near-term challenge in building investor confidence is deepening CSX’s bench following the changes in 4Q,” he said.

Foote’s hiring was announced in late October following the resignation of prominent female executives Chief Operating Officer Cindy Sanborn and Chief Marketing Officer Fredrik Eliasson.

Foote told investors on Friday he believes the “real heavy lifting has been done” and there will be “modifications and changes that we will make”.

CSX has been dogged for months with customer complaints, persistent service issues and increased federal scrutiny.

The company’s shares were trading at $50.90, after closing at $52.81 on Friday.

Reporting by Rachit Vats in Bengaluru; Editing by Saumyadeb Chakrabarty