Is Merger on the Cards Between Union Pacific & Norfolk Southern?

Globe and Mail

5 days ago

The railroad industry is likely to witness a new merger. Reportedly, the companies in talks regarding the aforesaid merger are Union Pacific Corporation UNP and Norfolk Southern Corporation NSC.
Headquartered in Omaha, NE, Union Pacific, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. Currently, UNP has a market capitalization of $134.35 billion. UNP carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Norfolk Southern, headquartered in Atlanta, GA, engages in the rail transportation of raw materials, intermediate products and finished goods in the United States. Currently, NSC has a market capitalization of $62.37 billion. NSC currently carries a Zacks Rank #4 (Sell).
According to the sources, the discussions are in the 'early stage' and at present lack promise of going through or being accepted by regulatory bodies. However, none of the companies have yet confirmed anything on the merger. Earlier this year, Union Pacific,chief executive officer, Jim Vena hinted at the possible profits that are likely to result from such a merger. This includes the enhancement of transfer-based bottlenecks in places like Chicago, where West Coast operators and East Coast operators often offload cargo to be transferred to another operator's network.
A merger between Union Pacific and Norfolk Southern will generate the first modern West-to-East single-line freight railroad in the United States. Though the merger may generate easy connectivity between East Coast and West Coast, like any other deal, this deal requires regulatory approvals from multiple sources, primarily the Surface Transportation Board. For approval, UNP and NSC need to show that the deal will boost competition and aid the public.
Shippers usually oppose mergers because decreasing the number of railroads in the country may further limit their options for shipping goods. Notably, the regulatory burden for merging railroads has historically remained high. The significant merger in the railroad industry was in 2023, when Canadian Pacific CP acquired Kansas City Southern for $31 billion, creating CPKC railroad.
Amid the uncertain merger news, we await the upcoming second-quarter 2025 earnings results of both companies. While UNP is scheduled to report second-quarter 2025 results on July 24, before market open, NSC is slated to post second-quarter 2025 results on July 29.
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Union Pacific Corporation (UNP): Free Stock Analysis Report
Norfolk Southern Corporation (NSC): Free Stock Analysis Report
Canadian Pacific Kansas City Limited (CP): Free Stock Analysis Report