Barclays cuts South Bow stock rating on permitting concerns

Barclays has lowered South Bow Corporation's stock rating from Equalweight to Underweight and reduced its price target from $35.00 to $33.00. The stock is currently trading at $33.84, and analysts consider it overvalued. Three analysts have lowered their earnings estimates for the upcoming period, supporting Barclays' cautious outlook.

The downgrade is primarily due to limited near-term positive catalysts for the company. Analyst Theresa Chen pointed out that the company's future performance will depend heavily on the Prairie Connector pipeline and its associated long-haul route to the U.S. Gulf Coast, including Liberty Bridge and Bridger's portion. South Bow has secured significant commitments for the project, but the path to final investment decision remains uncertain and is subject to permitting and regulatory complexities.

Barclays noted that delays in similar interstate pipeline projects have occurred in the past. The company's strength lies in its recent financial improvements, including an increase in normalized EBITDA expectations for 2026 and adjusted distributable cash flow guidance. South Bow also reported better leverage and growing customer commitments for future expansion of its crude oil transportation assets, with a reduced net debt to normalized EBITDA ratio of 4.4 times.