Last Update 10 Feb 26

Fair value Decreased 0.94%

KNF: Big 6 Contract And Future Earnings Framework Will Drive Upside

Analysts have trimmed their price target on Knife River by about $1 to roughly $96, reflecting slightly adjusted assumptions for fair value, discount rate, revenue growth and future P/E, even as new coverage maintains a generally supportive stance on the stock.

Analyst Commentary

Bullish Takeaways

Bullish analysts highlight Knife River's positioning in its core markets as a key support for the current valuation, arguing that the revised target still reflects confidence in the company’s ability to execute on its existing project pipeline.
They point to the use of a future P/E framework in their models, suggesting that the stock is being valued on expected earnings power rather than just near term fluctuations.
Supportive research views the recent initiation and coverage as a sign that the name is increasingly on institutional radars, which can help liquidity and price discovery over time.
Some bullish analysts see the modest reduction in the target price as a refinement of assumptions on discount rates and revenue trajectories rather than a change in the overall positive view on the business model.

Bearish Takeaways

Bearish analysts are cautious about the sensitivity of Knife River’s valuation to relatively small shifts in discount rate and revenue growth assumptions, which can tighten the margin of safety at current prices.
The cut to the price target, even if modest, reflects concern that prior expectations for future P/E multiples may have been too optimistic, especially if execution or demand trends come in below modelled levels.
There is some unease around how dependent the fair value estimates are on longer term forecasts, which can add forecasting risk if project timing, costs or volumes differ from current assumptions.
More cautious voices also flag that, with a still supportive stance already reflected in coverage, any further adjustment to assumptions could lead to additional pressure on valuation if sentiment turns less constructive.

What's in the News

Knife River Corporation reported a $112 million materials and paving award in Texas, tied to the State Highway 6 "Big 6" improvement project in the Bryan/College Station area. (Key Developments)
The Big 6 project involves reconstructing and expanding a 12 mile stretch of State Highway 6 from four lanes to six, with work expected to run through 2030. (Key Developments)
Knife River is serving as an asphalt and paving subcontractor to Fluor Corporation on the Texas Department of Transportation project, which has a total value of $671 million. (Key Developments)
The contract calls for Knife River to supply about 928,000 tons of hot mix asphalt for road widening, upgraded interchanges, auxiliary lanes and shared paths for bicycles and pedestrians. (Key Developments)
Knife River also has the option to supply sand, MSE backfill and base course to Fluor Corporation on an as needed basis over the course of the Big 6 project. (Key Developments)

Valuation Changes

Fair Value: The price target moved slightly from about $96.91 to $96.00, a modest reduction of roughly $0.91.
Discount Rate: The assumed discount rate edged down from 8.55% to about 8.44%, indicating a small adjustment in the required return used in the model.
Revenue Growth: The forecast revenue growth assumption shifted marginally from 6.12% to about 6.09%, a very small change in expected top line expansion.
Net Profit Margin: The projected profit margin moved from 6.46% to about 6.52%, a slight increase in expected profitability within the model.
Future P/E: The assumed future P/E multiple eased from 29.50x to about 28.88x, reflecting a small change in the valuation multiple applied to future earnings.

Exposure to public infrastructure projects and strategic acquisitions position the company for sustained revenue growth and improved market penetration.
Margin expansion is driven by dynamic pricing, operational excellence, vertical integration, and emphasis on eco-efficient, innovative products.
Dependence on public funding, regional risks, disruptive weather, rising costs, and acquisition-driven debt collectively threaten Knife River's margins, earnings growth, and financial flexibility.

Catalysts

About Knife River

Provides aggregates-led construction materials and contracting services in the United States.What are the underlying business or industry changes driving this perspective?

Knife River's record $1.3 billion backlog and exposure to public infrastructure projects-supported by robust, multiyear federal and state Department of Transportation funding (including 60% of IIJA funds still to be spent)-positions the company for strong, sustained revenue growth well into 2026 and beyond.
Intensifying dynamic pricing initiatives across all product lines and continued migration toward high-margin aggregates, supported by recent acquisitions, are expected to boost average selling prices and improve EBITDA margins in the coming quarters.
Ongoing geographic expansion through targeted, aggregates-led acquisitions (such as Strata, Kraemer, and High Desert) increases Knife River's market penetration and addressable customer base, directly enhancing revenue and earnings potential.
Investment in operational excellence programs (PIT Crews) and vertical integration, combined with digitization and process improvements, is expected to reduce input costs and drive margin expansion, positively impacting net margins and long-term profitability.
Growing demand for sustainable construction, combined with the company's emphasis on eco-efficient manufacturing and new product development, provides potential for premium pricing, differentiation, and increased contract wins, offering upside to revenue and EBIT growth over the long term.

Knife River Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Knife River's revenue will grow by 7.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.2% today to 7.2% in 3 years time.
Analysts expect earnings to reach $264.4 million (and earnings per share of $4.0) by about September 2028, up from $153.3 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.7x on those 2028 earnings, up from 29.2x today. This future PE is greater than the current PE for the US Basic Materials industry at 24.1x.
Analysts expect the number of shares outstanding to grow by 0.09% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.14%, as per the Simply Wall St company report.

Knife River Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Knife River's significant exposure to the Oregon market, which faces persistent infrastructure funding delays and legislative impasse, poses ongoing risk to both revenue and margin contribution; continued softness or lack of new DOT funding in Oregon could further compress consolidated EBITDA and earnings in future periods.
Extreme weather events, such as heavy rainfall and flooding in key regions (e.g., Montana, Wyoming, Texas), have demonstrably disrupted operations, delayed projects, and increased per-unit production costs; as climate volatility increases, the company faces persistent operational risks and is likely to see ongoing margin pressure and revenue volatility.
The company's strategy of pursuing bolt-on acquisitions and rapid expansion has driven up overhead and integration costs (notably a step up in SG&A and increased debt/leverage after acquiring Strata and others); any slowdown in the acquisition pipeline or integration missteps could erode expected margin improvement and strain net earnings and balance sheet flexibility.
Heavy reliance on sustained, record-setting public infrastructure funding (with 90% of current backlog tied to public DOT budgets) exposes Knife River to the risk of cyclical pullbacks, non-renewal, or diversion of funding-especially if state or federal politics shift-potentially reducing backlog, compressing revenue growth, and impacting long-term profitability.
Rising input costs in trucking, labor, and energy (mid-single digit increases year-over-year) combined with lower fixed cost absorption due to weather or localized volume declines could persistently pressure operating margins, especially as production mix shifts away from historically higher-margin markets like Oregon, constraining overall earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $110.778 for Knife River based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $131.0, and the most bearish reporting a price target of just $97.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.6 billion, earnings will come to $264.4 million, and it would be trading on a PE ratio of 29.7x, assuming you use a discount rate of 8.1%.
Given the current share price of $78.88, the analyst price target of $110.78 is 28.8% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

KNF: Regional Infrastructure Recovery And Backlog Will Drive Upside Into 2025