No, that’s not how much Vena will earn as the railroad’s new chief operating officer. Under the terms of his contract, he’ll earn a base salary of $600,000 and will be eligible for an annual cash bonus of up to $750,000.
But $9 billion is the value created by the jump in UP’s stock price since Vena, a former Canadian National executive and E. Hunter Harrison protege, was named to lead UP’s operations and its shift to Precision Scheduled Railroading.
UP’s stock closed on Monday at $138.65 per share. After UP’s late Monday announcement that Vena would become UP’s chief operating officer on Jan. 14, the railroad’s stock shot up more than 6.5 percent in after-market trading. And it stood at $150.76 per share when the market closed on Tuesday, a gain of 8.7 percent.
The rise was UP’s biggest single-day move since 2009 — and is evidence that investors gained a jolt of confidence from having a veteran of Harrison’s operating model in charge of UP’s transition to an operating plan based on the principles of Precision Scheduled Railroading.
Several Wall Street analysts said the hiring of a PSR veteran would help UP avoid service disruptions and accelerate changes it began on Oct. 1 with its switch to the new Unified Plan 2020.
“We were previously skeptical on UNP’s likelihood of successfully implementing PSR and key to that skepticism was the absence of a C-suite manager with PSR experience,” wrote RBC Capital Markets analyst Walter Spracklin. “With a seasoned PSR veteran now in the COO role, we expect dramatic changes will occur at UNP.”
“This marks yet another milestone in the PSR chronicles at UNP, and puts the company one step closer to full network implementation by mid-2019 — which is now clearly visible,” Credit Suisse analyst Allison Landry said in a note. “We think execution risk is diminished.”
UP was already ahead of schedule with rolling out its new operating plan, which is in place on its Mid-America Corridor linking the Midwest and Chicago with the Gulf Coast and Mexico. UP is currently changing the train plan on its routes linking Southern California with Texas and Chicago. The third and final phase will cover routes in the Pacific Northwest.
“Operational improvements could materialize faster under Vena’s leadership as he brings to bear his extensive experience in PSR,” BMO Capital Markets analyst Fadi Chamoun said in a note.
The bump in UP’s stock price was reminiscent of what happened at CSX Transportation in January 2017, when Harrison left the helm of Canadian Pacific five months early. When news surfaced that Harrison and his hedge fund partner were targeting a management shakeup at CSX, the railroad’s stock price soared 23 percent.
