South Bow cut to Sell equivalent at J.P. Morgan on muted EBITDA growth profile

[Golden pipes going to oil refinery]
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South Bow (NYSE:SOBO [https://seekingalpha.com/symbol/SOBO]) -2.5% in Thursday's trading as J.P. Morgan downgraded the energy infrastructure company to Underweight from Neutral with a $27 price target, citing lower expected total return potential compared to JPM's coverage universe, required balance sheet deleveraging, lower growth, and meaningful single asset risk.

JPM analyst Jeremy Tonet said he previously highlighted Keystone's long-term take-or-pay contracts and robust connectivity from growing Western Canadian Sedimentary Basin crude oil production to U.S. demand centers, but "a more muted EBITDA growth profile, paired with fewer near-term catalysts, collectively underpin a less attractive outlook vs. midstream peers at this juncture."

While acknowledging a modest step up from Blackrod in-service, Tonet said limited financial flexibility to deploy incremental growth capital or boost shareholder returns weighs on South Bow's (NYSE:SOBO [https://seekingalpha.com/symbol/SOBO]) outlook, and limited near-term growth exacerbates balance sheet de-risking, with the company targeting FY 2025 net leverage of 4.8x.

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