MW Buy these stocks as railroad-merger talk heats up, analyst says

By James Rogers

CSX's stock has been upgraded by TD Cowen, as while merger talk has been focused on Union Pacific and Norfolk Southern, the analyst isn't ruling out a deal involving CSX

Recent talk of possible merger activity involving Union Pacific Corp. and Norfolk Southern Corp. raises the possibility of broader consolidation in the industry, which could also impact CSX Corp., according to TD Cowen.

Set against this backdrop, TD Cowen turned bullish on shares of both Norfolk Southern $(NSC.AU)$ and CSX $(CSX.AU)$ on Monday.

The Wall Street Journal reported last week that Union Pacific Corp. (UNP) was in talks to acquire Norfolk Southern. Union Pacific and Norfolk Southern declined to comment.

Combining Union Pacific and Norfolk Southern would create a vast transcontinental railroad. Omaha, Neb.-based Union Pacific has extensive operations in the western U.S., while much of Atlanta-based Norfolk Southern's network spans the eastern part.

Read: M&A chatter swirls around Union Pacific and Norfolk Southern. This is why a deal makes sense.

On Monday, TD Cowen upgraded Norfolk Southern's stock to buy from hold and raised its price target to $323 from $263, with the new target implying about 17% upside from current levels. The stock, which had closed Friday at a three-year high after the WSJ report, pulled back 0.2% in morning trading on Monday.

"Conservative synergy estimates suggest substantial upside to [Norfolk] shares," TD Cowen analyst Jason Seidl wrote in a note to clients. "A bid announcement by [Union Pacific] would be catalyst as perception of regulatory hurdles is gradually improving."

The stock has rallied 17.9% in 2025, outpacing the S&P 500 index's SPX gain of 7.5%.

TD Cowen also upgraded CSX to buy from hold Monday.

"We view the logical conclusion of railroad consolidation meaning four Class I [railroads] ultimately leading to two, producing a rising tide for both Eastern Class Is irrespective of the first pairing that moves forward," he wrote. "We also see CSX as one of the railroads that is best set up next year for operational improvement once their two major network projects (Howard Street Tunnel and Blue Ridge Subdivision) are completed later this year."

A Class I railroad is defined as any carrier earning revenue greater than $1.074 billion, according to the Surface Transportation Board, the federal agency that regulates surface transportation, primarily rail freight. The four U.S.-based Class I carriers are Union Pacific, Norfolk Southern, CSX, and privately held Burlington Northern Santa Fe (or BNSF).

While attention has been focused on a possible deal between Union Pacific and Norfolk Southern, the analyst said "it's too early to rule out UNP-CSX."

CSX's stock rose 0.5% in morning trading, putting them on track to close at a seven-month high.

TD Cowen also raised its CSX's stock price target to $45 from $32, which the new target about 30% higher than current prices.

Union Pacific shares were up 0.5% in morning trades after ending Friday's session down 1.2%.

-James Rogers

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July 21, 2025 10:06 ET (14:06 GMT)

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