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Union Pacific to Invest $100M to Upgrade Yard Infrastructure

Union Pacific (NYSE: UNP) has agreed to buy 20 battery-electric locomotives for testing in yard operations. It seeks to invest about $100 million toward purchases and upgrades to yard infrastructure.

The company offers transportation services for diversified businesses, including agricultural products, food and beverage products, petroleum and gases, chemicals, coal, industrial products, intermodal and automotive.

Union Pacific will be purchasing locomotives from Progress Rail and Wabtec Corporation. Also, the company said that it would be the world’s largest carrier-owned battery-electric locomotive fleet in freight service.

The first units are anticipated to reach in late 2023 with complete delivery by late 2024. The company plans to use locomotives in rail yards in California and Nebraska and will test them in cold and warm weather.

The Chairman, President and CEO of Union Pacific, Lance Fritz, said, “We’re committed to actions that reduce Union Pacific’s environmental footprint as we work toward our ultimate goal of reaching net zero emissions by 2050. These investments will contribute to further developing this important technology and providing industry-wide benefits.”

Wall Street’s Take

Last week, Deutsche Bank analyst Amit Mehrotra maintained a Buy rating on Union Pacific and lowered the price target to $260 from $270. The new price target implies 5.7% upside potential from current levels.

Overall, the Street has a bullish outlook on the stock with a Strong Buy consensus rating based on 15 Buys and 2 Hold. The average Union Pacific price target of $274.06 implies upside potential of about 11.4% from current levels.

Dividend

UNP increased its quarterly common stock dividend in December 2021 to $1.18, up 10.3% from the previous payout, which was paid on December 30. Union Pacific’s dividend yield of 1.75% is better than the sector’s average of 1.34%.

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