We recently compiled a list of the 10 Best Transportation Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Union Pacific Corporation (NYSE:UNP) stands against the other transportation stocks.
Transportation stocks are those of companies classified as industrial businesses, which range from heavy equipment manufacturers to transportation service providers.
According to the Business Research Company, the transport market has expanded significantly in recent years. It is projected to rise from $6941.93 billion in 2024 to $7522.07 billion in 2025, with a compound annual growth rate of 8.4%. Economic expansion, population increase, technical improvements, and consumer behavior are all factors that contributed to historical growth. Meanwhile, the transportation sector is anticipated to boom significantly in the next few years. It will reach $9968.7 billion in 2029, with a compound annual growth rate of 7.3%. Regionally, Western Europe had the largest transport market in 2024. Asia-Pacific was the second-largest inland water transport market.
As of February 22, 2025, the broader market’s transportation industry had returned 3.14% in the previous year, 5.25% in the previous five years, and 4.85% over the last ten. However, performance was negative, at 2.24% year to date and 0.80% over three years.
According to S&P Global’s report, despite a minor slowdown in GDP growth to 2.0% from 2.7% in 2024, the transportation infrastructure industry in the United States is anticipated to experience consistent demand and expansion in 2025. While volume growth in enplanements, port containers, transit ridership, and automobile traffic may moderate, most modes of transportation will continue to grow through 2027. Public transit ridership is projected to stay at 90% of pre-pandemic levels unless external factors, such as reduced remote work or congestion pricing, boost demand. Meanwhile, enplanements, port container traffic, and vehicle travel are likely to stay above pre-pandemic levels, resulting in stable financial performance for this market.
Looking forward, as per Harris William’s report, the transportation and logistics sector is expected to grow rapidly in 2025, propelled by M&A activity and economic recovery. The automotive and heavy-duty aftermarkets remain resilient due to higher maintenance demand as new car prices rise. Investors are attracted to non-discretionary services such as repairs and fleet management. Third-party logistics (3PL) is evolving with technologically advanced solutions to optimize supply chains. Transportation infrastructure services (TIS) continue to draw investment due to their critical role in maritime, rail, and road networks. Companies that provide important, high-demand solutions have growth potential, making the sector a prime target for capital deployment and innovation.
Frank Mountcastle Head of M&A Group, Head Managing Director, commented:
“The transportation and logistics industry’s mix of established and emerging growth drivers will continue to attract a wide set of investors,” “The future is bright for businesses that embrace technology to create efficiencies and add more value while bringing specialized capabilities and a broader array of solutions to their customers.”
According to the PWC’s Transportation and Logistics: US Deals 2025 outlook, the U.S. transportation and logistics industry saw $51.5 billion in deal value across 71 announced transactions in the six months ended November 15, 2024, up from $39.5 billion and 69 agreements in the previous period. This growth shows that investor confidence is rising in line with improved profitability. The transportation and logistics (T&L) sector is seeing an increase in dealmaking due to strong economic conditions and investor confidence. Following the Federal Reserve’s first rate decrease in over four years and the next administration’s deregulatory agenda, M&A activity is expected to revive. While financial purchasers’ participation has slowed, strategic participants are driving transactions, particularly as freight rates and profitability stabilize. Trucking consolidation, railroad logistics innovation, and technological developments in logistics are all key themes to keep an eye on. To profit on the expected market rebound, dealmakers will need agility in fundraising, talent retention, and a strong M&A playbook.
Darach Chapman, US Transportation and Logistics Deals Leader, stated:
“T&L deals activity is set to rebound, driven by demand recovery and supply rationalization. However, macro factors such as trade policy and deregulation will continue to shape M&A opportunities.”
Methodology
We sifted through holdings of Transportation ETFs and online rankings to form an initial list of 20 transportation stocks. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of over 1,000 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Market Cap as of February 22 as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An intermodal container train winding through a rural landscape.
Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Investors: 93
One of the Best Transportation Stocks, Union Pacific Corporation (NYSE:UNP) is a rail freight transportation firm. It has a large railroad network over 23 states, and it is actively growing its mainline and terminal capacity by building new sidings and extending old ones. These projects are especially critical in high-growth areas like the Pacific Northwest, where modifications are being made to enable growing exports of soda ash and grain. In the Southwest, attempts are being made to improve intermodal services. In addition, the company is implementing new technology like GPS tracking for containers and rail pulse systems to boost service reliability, provide real-time tracking, and improve customer communication.
The stock has surged by more than 7% so far in 2025. Union Pacific Corporation (NYSE:UNP) had a 5% rise in revenue carloads, which contributed to improved financial results in Q4 2024. Despite a 70-basis-point setback due to the ratification of a crew staffing agreement, its operating ratio grew to 58.7%, representing a 220-basis-point improvement. The operating income rose by 5% to $2.5 billion. Furthermore, management is confident about 2025, with a $4.5 billion share repurchase plan and a capex target of $3.4 billion.
Bernstein analyst David Vernon boosted Union Pacific Corporation’s (NYSE:UNP) price target to $284 from $277, maintaining an Outperform rating on the stock. According to the firm, railroads have transitioned from a consensus-long sector to a very boring group, dragged down by sluggish demand and battling with cost pressure and margin erosion. Bernstein believes that “we are moving past the worst of times.”
Bretton Fund stated the following regarding Union Pacific Corporation (NYSE:UNP) in its Q4 2024 investor letter:
“The main detractor was Dream Finders, taking 1.5% off the fund, and Union Pacific Corporation (NYSE:UNP) was a minor detractor with a -0.2% impact. The rail industry has seen tepid revenue growth the past few years as higher-revenue coal volume declines and is replaced by lower-revenue intermodal volume sourced from ocean and truck carriers. Despite the growth challenge, Union Pacific managed to cut costs and grow earnings per share by 6%. The stock returned -5%.”
Overall UNP ranks 3rd on our list of the best transportation stocks to buy according to hedge funds. While we acknowledge the potential for UNP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UNP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
