Shares of CSX Corp. (CSX) are tumbling Friday, down about 8% in early trading after the company announced that CEO Hunter Harrison would take a leave of absence due to health concerns.
It's not clear what health issues forced Harrison, who is 73, to step away, although his health has been an issue for some time. Still, CSX stock surged in January on the prospect of getting Harrison on board as CEO, jumping from $37 to $45 in just one day. The stock went on to hit a high around $58.
Given the dramatic spike following Harrison's arrival, it's only fair for the stock to give up some of its gains due to this unfortunate development, TheStreet's Jim Cramer said on CNBC's "Mad Dash" segment Friday.
James Foote will take over as the interim CEO and while Harrison's plans will likely be carried on, there are questions as to whether others can execute as efficiently as he did. Harrison said he could do a better job and that's exactly what he was doing at CSX, Cramer reasoned.
In other words, the decline shouldn't surprise investors.
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Cramer, who also manages the Action Alerts PLUS charitable trust portfolio, argued that investors shouldn't sell shares of Union Pacific (UNP) or Norfolk Southern (NSC) because of Harrison's departure from CSX. In fact, he argued that investors may even want to consider buying Union Pacific.
The railroad operator looks set to benefit from a strong fourth quarter. Retail and auto sales have been strong and Union Pacific has a lot of service in Texas, which should be getting plenty imports as it rebuilds from Hurricane Harvey. Plus, the western United States is booming, "and they own the West," he concluded.
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