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RBC Capital initiated coverage on Knife River Corp. (NYSE:KNF) Monday with an outperform rating and a price target of $129.00. The stock, currently trading at $80.78, has experienced significant pressure recently, declining nearly 13% in the past week according to InvestingPro data.
The construction materials company operates as an aggregates-led, vertically integrated business across several product categories including aggregates, ready mix, asphalt and liquid asphalt, according to RBC Capital. With a market capitalization of $4.58 billion and strong financial health metrics from InvestingPro, including a comfortable current ratio of 2.94, the company maintains solid operational foundations.
RBC Capital noted that Knife River focuses on mid-sized, high-growth markets in the US and is pursuing a strategy to increase its exposure to aggregates while raising its EBITDA margin by 400 basis points, representing a 25% increase over the medium term.
The firm stated this margin improvement would be achieved through "operational efficiency improvements, pricing discipline, growth capex and M&A," describing Knife River as offering a "doubled-edged growth story" in both revenues and margins.
RBC Capital believes the market has not fully priced in the delivery of the company’s EDGE strategy, creating what the firm calls "an attractive opportunity" for investors.
In other recent news, Knife River Corporation announced its first-quarter 2025 earnings, revealing a significant miss in both earnings per share (EPS) and revenue compared to analyst forecasts. The company reported an EPS of -$1.21, falling short of the expected -$0.68, while revenue came in at $353.5 million, below the anticipated $385 million. Despite these results, Knife River raised its full-year revenue guidance by $45 million, supported by recent strategic acquisitions and operational enhancements. The acquisition of Strata Corporation was highlighted as a key factor in this revised outlook, with expectations for a record year in 2025. Analysts from firms such as Davidson and Stephens have shown interest in the company’s integration of Strata and its impact on Knife River’s future performance. Furthermore, Knife River’s CEO, Brian Gray, expressed confidence in achieving the most profitable year in the company’s history, citing ongoing infrastructure investments and strategic positioning. The company’s vertically integrated business model and strong market presence in mid-sized, high-growth areas are expected to drive future growth. Despite the challenges faced in the first quarter, Knife River remains optimistic about its long-term growth prospects.
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