OMAHA, Neb. - Union Pacific Railroad (NYSE:UNP) and Rocky Mountain Steel Mills announced today a seven-year contract for domestic production of steel rails, according to a press release statement. The $147.7 billion railroad operator, a prominent player in the Ground Transportation industry, currently trades at $248.88 per share.
Rocky Mountain Steel, located in Pueblo, Colorado, is the only remaining dedicated rail production facility in the United States. The company's steel products are produced by members of the United Steelworkers.
Union Pacific has sourced steel rail from the Pueblo mill since the early 1890s. The agreement ends pending legal disputes between the companies, with Union Pacific withdrawing its previously filed lawsuit in Nebraska.
Rocky Mountain Steel expects to begin operations this year at a new long rail mill, constructed with a more than $1 billion investment. The facility will produce 100-meter lengths of rail, which require 80% fewer welds than standard 80-foot rails. The mill is powered by a 1,800-acre solar farm.
"We appreciate the longstanding relationship with Rocky Mountain Steel, its dedicated workforce and their collective commitment to domestic steel manufacturing," said Jim Vena, CEO of Union Pacific.
Vena referenced Union Pacific's pursuit of a merger with Norfolk Southern to create a transcontinental railroad.The railroad operator generated $24.51 billion in revenue over the last twelve months with an impressive gross profit margin of 56.35%. According to InvestingPro analysis, the stock currently appears overvalued relative to its Fair Value estimate.
Doug Matthews, CEO of Orion Steel, the parent company of Rocky Mountain Steel Mills, said the contract "reinforces the one-of-a-kind partnership between Union Pacific Railroad and Rocky Mountain Steel."
Rocky Mountain Steel is described as one of the largest producers of steel products in North America, manufacturing rail and steel for infrastructure, construction, telecom, automotive, and drilling applications.
Union Pacific operates in 23 western states.
In other recent news, Union Pacific Railroad has reached an agreement with the American Train Dispatchers Association, guaranteeing lifetime job security for union members after its proposed merger with Norfolk Southern. This merger is under regulatory review, with the Surface Transportation Board seeking detailed internal documents, a move RBC Capital Markets notes as unexpected. Baird has upgraded Union Pacific's stock rating to Outperform, raising its price target to $311 due to anticipated merger synergies. Meanwhile, BofA Securities has reiterated a Buy rating on Union Pacific, maintaining a $297 price target, despite potential cost pressures from rising oil prices.
Additionally, Union Pacific has announced a $1.2 billion deal with Wabtec to modernize its AC4400 locomotives, a move that has positively impacted both companies' shares. This modernization agreement reflects Union Pacific's commitment to enhancing its operational capabilities. The merger and modernization efforts indicate strategic shifts within Union Pacific as it navigates regulatory and economic challenges. These developments are crucial as investors evaluate the company's future performance and strategic direction.