Railroad operator Union Pacific (UNP) has confirmed that it is in advanced talks to merge with rival Norfolk Southern (NSC) in what could become a $200 billion transcontinental railroad deal. This mega merger would combine Union Pacific’s strong presence in the western U.S. with Norfolk Southern’s 19,500-mile network across 22 eastern states. If approved, it would be the largest deal in railroad history and a major test of the Trump administration’s approach to large-scale mergers.
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Interestingly, the talks come at a challenging time for the railroad industry. Freight volumes have been unpredictable, labor and fuel costs are rising, and shippers have been worried about service reliability. In addition, Union Pacific has been dealing with weak automotive shipments and fluctuating coal demand, while Norfolk Southern is still recovering from leadership changes, activist investor pressure, and a $1.4 billion train derailment. Despite these challenges, Union Pacific recently beat profit expectations for the second quarter, thanks in part to stronger coal revenue.
However, if the two companies reach a deal, regulators will closely examine it. Indeed, the merger would need approval from the Surface Transportation Board, support from labor unions, and clearance from other federal agencies. It is also worth noting that railroad unions have long opposed industry consolidation due to job losses and potential service disruptions. At the same time, major shippers in industries such as autos, steel, and agriculture are also expected to resist.
Which Railroad Stock Is the Better Buy?
Assuming a merger doesn’t go through, analysts think that UNP stock has more room to run than NSC. In fact, UNP’s price target of $254.43 per share implies 13.3% upside versus NSC’s 3.1%.
