Baird upgrades Union Pacific on merger synergy outlook with Norfolk Southern

Union Pacific was upgraded to Outperform from Neutral by Baird, which said investors should use share pullbacks to build positions as the railroad’s proposed merger with Norfolk Southern moves through the regulatory process. Stock has lost 3% value this week.

Baird raised its price target on Union Pacific to $311 from $239 and set a $315 target for Norfolk Southern, citing potential cost savings and network benefits from combining the two rail operators, News.Az reports, citing Reuters.

The brokerage said the regulatory timeline for the deal has likely shifted toward mid-2027 after an incomplete ruling by the Surface Transportation Board and Union Pacific’s plan to resubmit its application by April 30.

While the process may take longer, Baird said it remains confident the merger will ultimately win approval. The debate around the deal has expanded beyond rival railroads to include a broader group of stakeholders, including lawmakers and industry groups, raising concerns about competition and pricing.

A group of Republican lawmakers led by Dusty Johnson recently wrote to the Surface Transportation Board warning the transaction could reduce rail-to-rail competition and increase freight rates. At the same time, the brokerage said the regulatory environment could shift after the resignation of the Justice Department’s antitrust chief, which it views as potentially more favorable for consolidation.

Baird said the five-member Surface Transportation Board currently has two vacancies, including the seat formerly held by Marty Oberman. The nomination of rail consultant Richard Kloster to replace him could help the approval process once confirmed.

The combined railroad would also create a transcontinental network that could shorten transit times and support freight growth, Baird said.

Union Pacific shares have risen about 13% this year, broadly in line with the industrial sector as measured by the Industrial Select Sector SPDR Fund, which is up roughly 11%.

Baird said investors should gradually increase exposure over the coming months ahead of potential sentiment improvement as the merger review progresses.

News.Az