Union Pacific's Turnaround Gains Momentum With Stellar Q2 Operations

Union Pacific Corp. UNP is demonstrating a clear acceleration in its operational and financial performance, fueled by significant productivity gains and a strong earnings beat in its latest quarter.

This resurgence, coupled with strategic advancements and a dividend increase, signals a strong trajectory for the rail giant amid evolving market dynamics.

Bank of America Securities (BofA) analyst Ken Hoexter reiterated a Buy rating on Union Pacific Corp. and raised the price forecast to $271 from $262, citing growing confidence in the company’s operational and financial trajectory under CEO Jim Vena.

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Hoexter now applies a 20.5x multiple to 2026 EPS, above Union Pacific’s historical 14x–20x range, to reflect meaningful improvements in service, cost discipline, and the cultural transformation already underway.

He expects a strong earnings recovery in 2025, with EPS projected to rise from $11.06 in 2024 to $11.80 in 2025 and $13.20 in 2026. This outlook aligns with management’s long-term target of high-single to low-double-digit compound annual growth.

The second-quarter earnings beat, $3.03 adjusted EPS versus $2.92 consensus, and an industry-best adjusted operating ratio of 58.1% further strengthen his conviction in the turnaround story.

While acknowledging potential dilution risks from merger talks with Norfolk Southern NSC, Hoexter sees the proposed combination as strategically aligned with the Trump administration’s push to modernize U.S. infrastructure and create a more competitive transcontinental rail network.

He also expects Union Pacific to maintain healthy leverage between 2.7x and 3.0x, continue scaling its share repurchase program, and reaccelerate top-line growth.

Union Pacific outperformed in the second quarter, posting $6.15 billion in revenue, up 2% year over year, driven by 4% volume growth, strong core pricing, and record productivity.

Adjusted operating income rose 5% to $2.53 billion, while key efficiency metrics showed notable gains: freight car velocity improved 10%, locomotive productivity increased 5%, and workforce productivity jumped 9%.

The board approved a 3% increase in the quarterly dividend to $1.38 per share, payable Sept. 30. Management reaffirmed its full-year guidance, with earnings tracking toward the high end of its long-term growth outlook.

Beyond BofA, other analysts have also adjusted their positions on Union Pacific. Wells Fargo analyst Christian Wetherbee maintained an Overweight rating and raised his price target from $250 to $260. Conversely, Evercore ISI’s Jonathan Chappell maintained an In-Line rating but slightly trimmed his price target from $244 to $238. Notably, Jefferies analyst Stephanie Moore upgraded the stock from Hold to Buy, significantly lifting her price target from $250 to $285.

Price Action: UNP shares are trading higher by 2.27% at $224.64 at the last check on Friday.

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