Union Pacific's (UNP) news of hiring an investment bank to explore the acquisition of an Eastern railroad would lead to the increased potential for merger discussions to drive US railroad valuations higher, BofA said in a
Thursday note.
BofA said it believed that potential mergers and acquisitions in the sector "blends with the current administration's desire to increase domestic competitiveness with a robust infrastructure."
However, any potential class 1 transcon rail merger would challenge the Surface Transportation Board's rules, mandating that a combination must be in public interest and would enhance competition, BofA said.
BofA upgraded its stock rating on CSX (CSX) to buy from neutral, with its price target up to $42 from $34. The firm maintained its buy rating on Norfolk Southern's (NSC) stock, while raising its price target to $305 from $290. Union Pacific was rated buy.
Price: 34.26, Change: +1.00, Percent Change: +3.01
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