Union Pacific Inks $1.2B Locomotive Modernization Deal With Wabtec

Union PacificUNP is doubling down on large-scale fleet modernization with its $1.2 billion agreement with Westinghouse Air Brake Technologies WAB, operating as Wabtec Corporation, a move that signals a clear preference for upgrading existing locomotive assets rather than replacing them outright. As the largest locomotive-modernization deal in rail industry history, the agreement strengthens UNP’s push to boost network efficiency, service reliability and asset productivity while maintaining disciplined capital deployment. The mega deal is aimed at modernizing the railroad’s AC4400 locomotives.

The deal builds on Union Pacific’s previous 2022 order, which is scheduled to be completed this year. The association with Wabtec highlights a broader industry shift toward sustainability, standardization and lifecycle optimization. By extending locomotive life and embedding next-generation diagnostics and control technologies, Union Pacific strengthens operational resilience and creates a scalable platform for future efficiency improvements. This approach sets a modernization benchmark that other railroads may increasingly follow.

Expressing delight at the inking of the deal, Jim Vena, Union Pacific CEO, stated that “these redesigned locomotives will be just like new, providing the improved fuel efficiency and enhanced reliability that we need to grow with our customers and to win new business.”

WAB significantly expands its long-term revenue visibility through this contract and reinforces its strategic partnership with one of North America’s largest Class I railroads. By delivering measurable gains—more than 5% lower fuel consumption, a 14% increase in tractive effort and an 80% improvement in reliability—Wabtec positions its advanced propulsion, control and digital systems as core drivers of improved railroad operating economics.

UNP’s Share Price Performance

Owing to such tailwinds, Union Pacific’s shares have gained 10.1% over the past six-month period compared with its Transportation - Rail industry’s 5.1% rise.

UNP’s Zacks Rank

UNP currently carries a Zacks Rank of #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Investors interested in the Zacks Transportation sector may consider LATAM Airlines Group LTM and Southwest Airlines LUV.

LTM currently sports a Zacks Rank #1.

LTM has an expected earnings growth rate of 52.6% for the current year.  The company has an encouraging earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, and met the mark once, delivering an average beat of 29.84%.

Southwest Airlines currently carries a Zacks Rank #2 (Buy).

LUV has an expected earnings growth rate of 336.6% for the current year. The company has an encouraging earnings surprise history. Its earnings topped the Zacks Consensus Estimate in three of the trailing four quarters, and missed the mark once, delivering an average beat of 253.9%.

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This article originally published on Zacks Investment Research (zacks.com).

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