Stephanie Link Buys Union Pacific Stock for 2026 Growth

Union Pacific Stock Analysis

• 📈 Stephanie Link, CIO at Hightower, has initiated a buy on Union Pacific (UNP), noting its modest 5% year-to-date gain makes it an interesting opportunity.
• 🎯 The investment is positioned for 2026 growth, anticipating continued strong economic performance, leading to better volumes and double-digit earnings growth.
• 💰 Union Pacific is also focusing on cost efficiencies and productivity, aiming for margin expansion and double-digit earnings growth.
• 📊 The company is actively using free cash flow to reduce debt, with its debt-to-EBITDA ratio trending down from 2.8 to 2.6 times.

Potential Norfolk Southern Acquisition

• 🤝 A key factor is the announced acquisition of Norfolk Southern, which is awaiting approval from the Surface Transportation Board.
• ✅ Indications suggest strong support from regulators and over 400 customers who have written in favor of the transaction.
• 💰 If approved, the deal is expected to generate $2 billion in synergistic EBITDA, split between $1 billion on the revenue side and $1 billion on the cost side.
• 🗓️ Approval is anticipated in the second half of the year, but fundamentals are expected to improve through the first half regardless.

Investment Strategy and Economic Outlook

• 💡 Link emphasizes a focus on strong fundamentals over momentum-driven stocks, stating she is underweight technology and overweight industrials and financials.
• 🚀 She is 100% on board with the premise of a strong economy in 2026, supported by administration policies and monetary policy from the Fed.
• 🛢️ An energy position was recently added, aligning with her view that cyclical sectors offer the best value currently.
• 📊 The transportation sector is showing strength, with 82% of stocks trading above their 40-week moving averages, indicating a broadening market leadership.