CSX has a $62.5 billion market capitalization, compared to $58.7 billion for Norfolk Southern. Union Pacific is the largest of the three S&P 500 railroad stocks, with a $138.1 billion market cap. BofA also cited CSX's internal improvements in the upgrade, according to The Fly investment site.

Merger talk is swirling around Union Pacific Corp. and Norfolk Southern Corp., in a deal that could create a railroad mega-carrier and a huge transcontinental network spanning the U.S.

The report by news website Semafor said Union Pacific, which operates in 23 western states, was working with investment bankers at Morgan Stanley to pursue a deal with one of the two major eastern railroads, CSX or Norfolk Southern. Union Pacific CEO Jim Vena has made public comments of his interest in creating a transcontinental railroad.