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CSX Corp Reaches Deal with Hedge Fund, Appoints New CEO

Zacks Equity Research

Putting all rumors to rest, Jacksonville, FL-based CSX Corporation CSX recently announced that it has inked a deal with Paul Hilal's Mantle Ridge hedge fund. The market was rife with speculations since Jan 19, that the company and the hedge fund were in talks to revamp its management to improve efficiencies.

As part of the agreement, CSX Corp. appointed E. Hunter Harrison as its chief executive officer (CEO), with immediate effect. Harrison replaces Michael Ward who had announced his retirement on Feb 21. Harrison is highly experienced in the railroad space. In fact, he recently served fellow railroad operator Canadian Pacific Railway Limited CP as its CEO.

Naturally, Harrison’s appointment is prudent as CSX Corp. remains focused on improving its fortunes. However, we note that Canadian Pacific had failed in its bid to acquire fellow railroad operator Norfolk Southern Corp. NSC during Harrison’s tenure as CEO.

Shareholders will, however, vote on the reimbursement of the compensation foregone ($84 million) by Harrison at Canadian Pacific, at its annual meeting. It seems that in a similar business move as the one he adopted at Canadian Pacific, Harrison intends to drive growth at CSX Corp. by slashing costs.

Apart from the change at its helm, CSX Corp. has appointed five new mutually agreed upon directors to its board as part of its reconstruction drive.  Moreover, three incumbent directors at the company intend to complete their tenure at the board at or before the conclusion of the 2017 annual meeting. The revamped 13-member board will have Hilal, whose hedge fund has a 4.9% ownership of CSX stock, as Vice Chairman. Edward J. Kelly, III will assume the responsibilities of Chairman.

However, it remains to be seen whether the agreement with Paul Hilal’s hedge fund will yield the desired results for CSX Corp. Investors will keenly await updates on the matter.

CSX Corporation Price


CSX Corporation Price | CSX Corporation Quote

Zacks Rank

CSX Corp. currently carries a Zacks Rank #2 (Buy). Investors interested in the broader transportation space may also consider United Continental Holdings UAL, which has the same Zacks Rank as CSX Corp. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  United Continental has an impressive track with respect to earnings, having surpassed the Zacks Consensus Estimate in each of the last four quarters by an average of 4.14%.

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