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Investing.com - Bernstein SocGen Group has reiterated an Outperform rating on Union Pacific (NYSE:UNP) with a price target of $294.00, representing significant upside from the current price of $216. According to InvestingPro data, Union Pacific , with its $128.1 billion market cap, maintains impressive gross profit margins of 56%.
The firm believes the proposed combination between Union Pacific and Norfolk Southern still projects mid-single digit accretion under revised, conservative assumptions laid out by Union Pacific.
Bernstein considers the assumptions used by both Union Pacific and Norfolk Southern in proposing the combination to be "extremely conservative," estimating they represent less than half of potential benefits.
The firm specifically notes that revenue synergies appear understated, cost targets seem reasonable, and the 27% reduction in synergies appears severe given the lack of competitive overlap between the companies.
Looking at the deal relative to consensus expectations could reveal significantly more upside potential from the transaction than currently projected, according to Bernstein’s analysis.
In other recent news, Union Pacific has reached ratified agreements with 11 unions, covering 46% of its craft employees, and interim deals with two major unions, including the International Association of Sheet Metal, Air, Rail and Transportation Workers and the Brotherhood of Locomotive Engineers and Trainmen. These interim agreements include a 3% pay increase effective from September 1. Additionally, Union Pacific announced the addition of 15 new Focus Sites across eight states, expanding access to its 32,000-mile rail network. Meanwhile, Argus has downgraded Union Pacific from Buy to Hold, despite acknowledging the company’s efficiency within the rail industry. The downgrade reflects the firm’s view on the rail industry’s growth compared to other transport options. In other developments, Union Pacific’s $85 billion bid to acquire Norfolk Southern has faced criticism from Senate Democratic Leader Chuck Schumer, who described the potential merger as a "hostile takeover." Lastly, the Trump administration recently removed Surface Transportation Board member Robert Primus, citing a misalignment with the president’s agenda.
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