KNF: Construction Recovery And Backlog Will Drive Long-Term Upside Potential

Analysts have modestly reduced their price target on Knife River to $96.80 from about $98.22, reflecting a slightly lower fair value and profit margin outlook, even as they acknowledge resilient demand, a solid $1.3B backlog and sector wide expectations for a multi year construction recovery.

Analyst Commentary

Recent Street research presents a mixed but constructive view on Knife River, with analysts balancing near term execution risks against a solid backlog and longer term recovery potential in U.S. construction and infrastructure spending.

Bullish Takeaways

• Bullish analysts point to Knife River's $1.3B backlog as a key support for medium term revenue visibility, arguing this underpins the stock's valuation even through a softer near term demand environment.
• Exposure to U.S. infrastructure and building materials is seen as a structural growth driver, with some analysts expecting Knife River to benefit as construction activity re accelerates into 2026 and 2027.
• Despite trimmed targets, positive ratings reflect confidence in management's ability to navigate regional funding volatility and weather related disruptions while maintaining margin discipline.
• Knife River is viewed as well positioned to capture upside from any earlier than expected recovery in residential and home improvement related demand, which could justify multiple expansion from current levels.

Bearish Takeaways

• Bearish analysts highlight limited near term upside, citing expectations for a muted Q3 given funding challenges in key markets and adverse weather that could constrain volume and profitability.
• The reduced price targets signal concerns that prior growth and margin assumptions were too optimistic, leading to a recalibration of fair value despite solid underlying demand in several regions.
• Visibility on large scale transportation funding remains uneven, with the downsizing of certain regional packages raising questions about the pace and magnitude of project awards over the next 12 to 18 months.
• Some analysts are cautious that the broader construction recovery may not materialize until late 2026, which could delay the realization of Knife River's full earnings power and cap near term multiple expansion.

What's in the News

• Knife River secured a major role as asphalt and paving subcontractor on the $671 million "Big 6" State Highway 6 improvement project in the Bryan/College Station, Texas market, with a $112 million contract to supply about 928,000 tons of hot mix asphalt and related materials through 2030 (Key Developments).
• The Big 6 project will reconstruct and expand a 12 mile stretch of State Highway 6 from four lanes to six. It is expected to improve commuter capacity, freight movement, emergency evacuation routes, and add shared paths for bicycles and pedestrians in a high growth corridor where Knife River can also supply additional aggregates and base materials as needed (Key Developments).
• Knife River narrowed its 2025 consolidated revenue guidance to a range of $3.10 billion to $3.15 billion and net income to $140 million to $160.5 million, indicating increased visibility into near term performance (Key Developments).

Valuation Changes

• Fair Value: reduced modestly from $98.22 to $96.80, indicating a slightly lower assessed intrinsic value per share.
• Discount Rate: edged down marginally from 8.53% to 8.51%, reflecting a slightly lower required return in the valuation model.
• Revenue Growth: increased slightly from 6.22% to 6.40% annually, implying a modestly more optimistic top line outlook.
• Net Profit Margin: trimmed from 6.77% to 6.48%, signaling a moderately lower expectation for future profitability.
• Future P/E: nudged higher from 28.41x to 29.09x, suggesting a small increase in the multiple applied to Knife River's forward earnings.