Union Pacific (NYSE:UNP) was raised to buy from hold at Jefferies after the railroad operator confirmed it was in talks with Norfolk Southern (NYSE:NSC) about a business combination. Investors should start building a position in Union Pacific (NYSE:UNP) to "get in on the ground level" on what is likely a "transformational" combination,

Union Pacific and Norfolk Southern confirmed that they are in “advanced” merger talks that would create a single U.S railroad with service stretching from the East to the West Coast. The Associated Press reported last week that the companies were discussing a tie-up but neither company acknowledged that until Thursday morning.

Union Pacific , the largest U.S. railroad operator, said on Thursday it is in advanced talks with rival Norfolk Southern , signaling that a deal to form a $200 billion coast-to-coast rail company could be close - and potentially trigger further consolidation among remaining freight rail giants.