Union Pacific Corporation (NYSE:UNP)’s Big Boy 4014, the world’s largest operating steam locomotive, has been touring the country this summer, and grown adults keep tearing up when they see it. CEO Jim Vena said the tour east of the Mississippi wouldn’t have been possible without one thing: the railroad operating firm’s pending merger with Norfolk Southern, since Union Pacific’s own tracks run west of the river. In part, the nostalgia tour is a goodwill campaign for the biggest deal in the company’s history.
A Strong Quarter
On the business itself, Union Pacific Corporation (NYSE:UNP) reported a strong quarter. Revenue rose 12% to $6.86 billion, beating the $6.71 billion expected, and adjusted earnings came in at $3.41 a share versus $3.24 expected. The company raised its full-year guidance to high-single-digit earnings growth, up from mid-single digits. The stock rose about 2% in premarket trading. Costs rose too; operating expenses climbed 13% to $4.1 billion, mostly from a 63% jump in fuel costs linked to the Iran war.
The Merger Just Got a Big Boost
Union Pacific Corporation (NYSE:UNP) is trying to buy Norfolk Southern in a deal now valued around $71.5 billion, down from an earlier $85 billion price tag as terms have moved with Union Pacific’s stock. It would create the first coast-to-coast U.S. railroad. The day before earnings, Union Pacific settled with Canadian National Railway, a major opponent that had been pushing regulators to demand more information. CN will drop its opposition in exchange for expanded Midwest access and a stake in two jointly owned terminal railroads. Vena called it proof the firm is “ready to move forward in the regulatory process.” The deal still isn’t approved, though. The Surface Transportation Board (STB) paused its review in May and just this week ordered Union Pacific to make employee-impact data public. Rivals BNSF and Canadian Pacific Kansas City are still lobbying against it, and some shippers and state attorneys general remain opposed. The companies still expect to close the deal in the first half of 2027.
That raises a real question. Is this merger clearing its last real hurdles, or did the CN settlement just remove one opponent out of several?
The Bull Case
The core business (Union Pacific’s actual railroad operations) is performing well on its own, guidance beat and rose, and pricing power held up despite surging fuel costs. The CN settlement removes a credible opponent and comes with political tailwinds too: Trump has publicly backed the merger and replaced a regulator who could have opposed it. Union Pacific Corporation (NYSE:UNP) and Norfolk Southern say the deal would save shippers $3.5 billion a year and remove 2.1 million trucks from the road. Wall Street responded fast: Baird, RBC, and JPMorgan all raised price targets this week, with RBC citing the CN deal directly as strengthening the merger’s case.
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The Bear Case
BNSF and Canadian Pacific Kansas City (CP), both larger than CN, are still actively opposed, and shippers and state attorneys general haven’t backed down. The STB’s review remains paused, and forcing public disclosure of employee data suggests regulators aren’t rubber-stamping this. Notably, JPMorgan raised its price target but kept a neutral rating, a sign at least one major bank isn’t calling this done yet. Fuel costs are also a real, ongoing drag tied to a war with no clean resolution in sight.
Insider Monkey’s Hedge Fund Data Analysis
Insider Monkey’s hedge fund database shows funds trimming ahead of this quarter. Overall, 96 funds were holding Union Pacific Corporation (NYSE:UNP) at the end of Q1 2026, down from 106, with dollar value held falling from $7.5 billion to $5.7 billion. That reflects sentiment before this week’s beat and the CN settlement, both of which have since turned more positive. In contract, there were only 45 hedge funds with bullish Canadian Pacific Kansas City (CP) positions at the end of Q1. Hedge funds clearly think UNP is a better stock to buy than CP.
Conclusion
Union Pacific had a genuinely strong quarter, and the CN settlement is a real step toward its biggest deal ever. However, one opponent down isn’t the same as approved. BNSF, Canadian Pacific Kansas City, wary shippers, and a regulator still asking hard questions remain in the picture. The next real test isn’t a nostalgia tour; it’s whether the Surface Transportation Board restarts its review.
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Disclosure: None.
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