Sell Rating for South Bow Corp: Challenging Financial Outlook and Limited Upside

Praneeth Satish, an analyst from Wells Fargo, maintained the Sell rating on South Bow Corp (SOBO – Research Report). The associated price target remains the same with C$31.00.

Praneeth Satish has given his Sell rating due to a combination of factors impacting South Bow Corp’s financial outlook. The company is expected to see reduced contributions from marketing and spot capacity, leading to a decrease in EBITDA estimates for 2025 and 2026. This adjustment reflects a challenging supply-demand environment and the need for additional growth projects, which could strain financial resources.
Furthermore, South Bow Corp’s valuation is considered underwhelming, with a dividend yield of 8% and no anticipated growth in dividends in the near term. The total return proposition is below the median for its peers, and the company’s EV/EBITDA ratio aligns with the industry median, offering limited upside. Despite the resolution of variable toll uncertainties in Canada, the company’s capital allocation priorities remain focused on debt reduction and funding specific projects, which may limit potential returns for investors.