KNF: Early-Cycle Recovery Will Drive Renewed Momentum Amid Sector Headwinds

Analysts have lowered Knife River's fair value estimate from approximately $102 to $98 per share, citing forecasted revenue growth headwinds and sector-specific challenges as highlighted in recent research.

Analyst Commentary

Recent street research offers a mix of optimism and caution regarding Knife River's outlook, with analysts weighing sector headwinds against potential catalysts for recovery and growth.

• Bullish analysts note that demand in regions outside Oregon remains solid. This supports a robust order backlog of $1.3 billion and underpins near-term revenue visibility.
• The U.S. building materials sector is expected to benefit from future interest rate cuts, particularly for companies positioned in early-cycle recovery segments.
• Home improvement exposure could lead to an earlier demand rebound compared to broader construction, offering upside potential for Knife River's growth trajectory.
• In the longer term, a sector recovery is anticipated to start in late 2026 into 2027. This could fuel renewed earnings momentum and potentially improve valuation multiples.

• Bearish analysts highlight persistent funding challenges in key markets such as Oregon. These challenges limit near-term revenue growth and put pressure on the company's outlook.
• Recent weather-related disruptions, especially in the Midwest and Northwest, have weighed on execution and could temper quarterly performance.
• The reduction in the Oregon transportation bill's scope represents a setback for infrastructure-driven growth opportunities in that region.
• Near-term sector caution prevails, with limited upside expected before a broader recovery materializes. This is resulting in downward revisions to valuation estimates and price targets.

What's in the News

• Knife River Corporation narrowed its consolidated earnings guidance for 2025, now expecting revenue between $3,100.0 million and $3,150.0 million, with net income ranging from $140 million to $160.5 million (Key Developments).

Valuation Changes

• The Fair Value Estimate has decreased from approximately $102.11 to $98.22 per share, reflecting recent adjustments to growth expectations.
• The Discount Rate has edged down slightly from 8.54% to 8.53%, indicating minimal change in perceived risk.
• The Revenue Growth Forecast has been reduced from 6.94% to 6.22%, signaling weaker anticipated top-line expansion.
• The Net Profit Margin is projected to rise moderately from 6.60% to 6.77%, pointing to potential improvements in operational efficiency.
• The Future P/E Ratio has fallen from 30.70x to 28.41x, highlighting a more conservative earnings multiple applied to forward estimates.