Analyst Thomas Wadewitz from UBS maintained a Hold rating on Union Pacific and keeping the price target at $240.00.
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Thomas Wadewitz has given his Hold rating due to a combination of factors related to Union Pacific’s financial outlook and merger plans. The company’s projected net annual synergies from the proposed merger with Norfolk Southern Corporation (NSC) are estimated at $2 billion, which is lower than the initial estimate of $2.75 billion. This adjustment accounts for potential revenue offsets from increased competition and share loss to other railroads. Despite these challenges, Union Pacific remains optimistic that line divestitures will not significantly impact their synergy targets.
Additionally, the merger involves substantial one-time costs, including $170 million in integration expenses and $2 billion in capital expenditures over two years. These financial commitments, along with a trading valuation of 17 times forward earnings per share compared to a long-term average of 19 times, contribute to the Hold rating. The anticipated shareholder votes and regulatory filings with the Surface Transportation Board are also key factors in the ongoing evaluation of Union Pacific’s stock performance.
In another report released today, Loop Capital Markets also upgraded the stock to a Hold with a $227.00 price target.