Multiyear Department Of Transportation Funding Will Enable Expansion

Analysts have lowered their price target for Knife River from $120 to $100. They cite ongoing funding challenges in Oregon and adverse weather conditions in key regions as the primary reasons for the revised outlook.

Analyst Commentary

Recent commentary from street research highlights both optimistic and cautious perspectives regarding Knife River's current valuation and growth prospects. While analysts acknowledge the company's operational strengths, there are prevailing concerns about external factors impacting near-term performance.

• Backlog remains healthy at $1.3 billion, indicating sustained demand and providing revenue visibility for future quarters.
• Solid demand trends continue in regions outside of Oregon, supporting the company's long-term growth trajectory.
• The recently passed $4.3 billion Oregon transportation bill, although smaller than originally hoped, may still support incremental project activity moving forward.
• Analysts maintain an optimistic outlook on underlying business fundamentals and execution capabilities. This continued optimism is reflected in the Outperform rating despite the revised target.

• Ongoing funding challenges in Oregon, particularly given the state legislature's inability to pass a larger transportation package, are expected to limit near-term upside potential.
• Adverse weather conditions across the Midwest and Northwest have disrupted operations and weighed on quarterly results.
• Q3 performance is projected to be subdued, reducing the likelihood of positive earnings surprises in the immediate term.
• Uncertainty around future public infrastructure funding in key regions continues to present execution risk and pressure on valuation multiples.

What's in the News

• Knife River Corporation issued full-year 2025 earnings guidance, projecting revenue between $3,100.0 million and $3,300.0 million, and net income between $143.4 million and $182.6 million (Key Developments).
• The company is actively seeking acquisitions and continues to maintain an active pipeline as part of its growth strategy, according to CEO Brian Gray during the recent Second Quarter Results Conference Call (Key Developments).
• Recent acquisitions, including High Desert, are intended to add aggregate reserves and expand downstream asphalt production and paving capacity in high-growth markets. Management highlighted the ease of integration and alignment with corporate strategy (Key Developments).

Valuation Changes

• The Fair Value Estimate has decreased slightly, falling from $110.78 to $106.78 per share.
• The Discount Rate has risen modestly, moving from 8.14% to 8.37%.
• The Revenue Growth Expectation has declined, now projected at 7.02% compared to the previous 7.36%.
• The Net Profit Margin has edged lower, decreasing from 7.24% to 7.01%.
• The Future P/E Ratio has increased marginally, from 29.68x to 30.03x.