What Happened?

Shares of freight rail services provider CSX (NASDAQ: CSX) jumped 3.1% in the afternoon session after a report revealed that rival railroad operator Union Pacific (NYSE: UNP) was exploring a potential acquisition. 

According to a report from Semafor, Union Pacific, the largest publicly traded railroad in the U.S., has engaged investment bankers from Morgan Stanley to assess a possible deal. While no specific target was named, the move has fueled speculation that Union Pacific could be looking to create a transcontinental network by acquiring an East Coast carrier like CSX or Norfolk Southern. This news sent shares of both potential targets higher, with investors anticipating a possible takeover premium. The potential for a merger comes as some analysts express confidence in CSX's future, with Benchmark recently raising its price target on the stock to $37, maintaining a "buy" rating.

After the initial pop the shares cooled down to $34.21, up 2.9% from previous close.

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What Is The Market Telling Us

CSX’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 5.6% on the news that the company reported underwhelming third-quarter earnings results. Its EPS missed, and its revenue fell short of Wall Street's estimates. Notably, the top line was negatively impacted by declining coal prices, lower fuel surcharge, and a reduction in other revenue. Overall, this quarter could have been better.

CSX is up 6.4% since the beginning of the year, and at $34.21 per share, it is trading close to its 52-week high of $36.88 from November 2024. Investors who bought $1,000 worth of CSX’s shares 5 years ago would now be looking at an investment worth $1,422.

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