Union Pacific Stock (UNO) Under Pressure: Price Target Trimmed on Merger Uncertainty

Union Pacific's stock (UNP) faces renewed scrutiny as analysts adjust their outlook on the railway giant, factoring in both persistent freight demand softness and the potential ramifications of its proposed merger with Norfolk Southern (NSC). 

Analyst Downgrades Signal Caution

BMO Capital downgraded Union Pacific to Market Perform, lowering the price target to $255 from $270. This decision reflects concerns surrounding the proposed merger with Norfolk Southern, a deal valued at $85 billion. The analyst views the merger as a potentially transformative event for the rail industry, but also one fraught with execution risks and the potential for regulatory changes that could negatively impact the industry's established value creation model. The firm indicated that limited visibility into regulatory outcomes and continued freight demand softness prompted the downgrade.

This downgrade follows a similar move by Deutsche Bank in December 2025, where analysts lowered their rating from ‘Buy' to ‘Hold' and significantly reduced the price target to $245 from $272. These revisions reflect a broader unease regarding Union Pacific's near-term prospects amid existing industry headwinds.

Merger Hurdles and Union Opposition

The proposed merger, aiming to create the first transcontinental railroad, has cleared a key hurdle with overwhelming shareholder approval. Union Pacific reported that 99.5% of votes cast were in favor of the combination. The company anticipates that the combined network, spanning over 50,000 route miles across 43 states and connecting approximately 100 ports, will improve service efficiency and competitiveness. However, the path forward is not without obstacles.

Major rail unions, representing a significant portion of workers at both Union Pacific and Norfolk Southern, have voiced strong opposition to the merger. Their concerns center on potential compromises to safety, increased shipping costs, and threats to job security. These objections introduce a layer of complexity to the regulatory review process.

The U.S. Surface Transportation Board (STB) is currently evaluating the proposed merger, assessing its potential impact on competition, service, safety, and the public interest. This review marks the first major rail merger evaluation under the STB's 2001 merger rules, which emphasize the need for enhanced competition and public benefit. The outcome of this regulatory scrutiny will be pivotal, potentially reshaping the competitive landscape and regulatory framework governing U.S. railroads.

Year-to-date, Union Pacific's stock has gained 1.34%, trading within a defined range. The recent analyst downgrades and the looming regulatory decision regarding the merger introduce uncertainty that could influence future valuation and market sentiment. The stock's performance reflects this ambiguity, sitting near the midpoint of its 12-month trading range.