What Happened?

Shares of freight transportation company Union Pacific (NYSE: UNP) fell 3.2% in the pre-market session after reports revealed the company was considering a major acquisition of an East Coast railroad. 

According to sources cited by SEMFOR, the railroad giant was in talks with investment bankers at Morgan Stanley to weigh a potential takeover of either CSX Corporation (NASDAQ: CSX) or Norfolk Southern (NYSE: NSC). An acquisition of this scale would likely face significant regulatory hurdles. The potential cost of such a large deal is likely causing investor concern, leading to the pre-market sell-off. In contrast, shares of the potential targets, CSX and Norfolk Southern, rose on the news. Union Pacific has not commented on the report.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Union Pacific? Access our full analysis report here, it’s free.

What Is The Market Telling Us

Union Pacific’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 9 months ago when the stock dropped 5.5% on the news that the company reported weak third quarter earnings results with revenue and EPS falling short of Wall Street's estimates. Q4 revenue guidance also calls for similar revenue compared to this quarter, below expectations. Overall, this was a weaker quarter.

Union Pacific is down 0.6% since the beginning of the year, and at $227.63 per share, it is trading 11.1% below its 52-week high of $256.09 from August 2024. Investors who bought $1,000 worth of Union Pacific’s shares 5 years ago would now be looking at an investment worth $1,256.

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