Union Pacific Corp. received a vote of confidence from Wall Street on Monday after Citi analyst Ariel Rosa upgraded the railroad operator to buy from neutral, citing attractive valuation, improved operating performance, and greater clarity surrounding its proposed merger with Norfolk Southern.
Union Pacific shares jumped over 1% in premarket trading after the upgrade.
Rosa also lifted his price target to $251 from $250, implying roughly 17% upside from Friday’s close.
Merger outlook improves despite contentious review
At the center of Rosa’s analysis is Union Pacific’s planned merger with Norfolk Southern, a deal that is expected to face close regulatory scrutiny.
Rosa acknowledged that the review process will be “contentious,” but said recent developments have clarified the grounds on which regulators are likely to assess the transaction.
According to Rosa, the probability of a clean approval with limited constraints has risen to between 65% and 70%, modestly higher than his previous assessment.
He noted that in July, Citi had downgraded Union Pacific to neutral amid what he described as a period of “deal purgatory,” where uncertainties surrounding the merger were expected to keep investors on the sidelines.
With greater visibility now emerging, Rosa said conditions have improved for a more constructive outlook.
Stock valuation and stand-alone strength
Even if the merger were to fall through, Rosa stressed that Union Pacific remains an attractive investment on its own.
Shares currently trade at around 18 times forward earnings, well below the S&P 500’s multiple of 24.7 and below the railroad’s long-term average valuation.
“The good news for UNP investors is that the attractiveness of UNP shares does not hinge on deal approval, as UNP trades at a discount to its long-term average PE on a stand-alone basis, even as it executes at a high level,” Rosa wrote.
The analyst also highlighted Union Pacific’s recent operating performance, which he believes positions the company well for its upcoming third-quarter 2025 earnings.
Strong execution, he added, should also improve the likelihood of successful integration if regulators ultimately approve the Norfolk Southern merger.
Market reaction and outlook
Union Pacific shares, which have fallen about 6% year-to-date, edged higher in premarket trading Monday following the upgrade, rising more than 1%.
Rosa emphasized that the recent pullback in the stock had pushed the upside potential into Citi’s “buy range,” further strengthening the case for an upgrade.
For investors, the dual narrative of potential merger synergies and underlying operational resilience has put Union Pacific back in focus.
While regulatory risks remain a factor, Rosa underscored that the stock’s value proposition does not depend solely on the merger outcome.
The upgrade reflects a broader view that Union Pacific’s fundamentals remain compelling, whether as part of a combined entity with Norfolk Southern or as a standalone operator.
With clearer regulatory expectations, discounted valuation, and strong execution, Rosa concluded that the shares look “too compelling to ignore.”
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