Oppenheimer reiterates Knife River Outperform with $120 target

On Tuesday, Oppenheimer maintained its Outperform rating on Knife River Corp. (NYSE: KNF) shares, with a steady price target of $120.00. According to InvestingPro data, the company, currently valued at $5.1 billion, trades at a P/E ratio of 26.2, suggesting a premium valuation relative to its near-term earnings growth potential. The firm’s analysts project the company to report its first-quarter results of 2025 in early May, noting that Knife River has not experienced any unexpected downturns, with the exception of typical seasonal fluctuations and some weather-related impacts in the upper Midwest and Montana.

The analysts at Oppenheimer expressed increased confidence in Knife River’s ability to surpass its initial 20% EBITDA margin target, even without relying on mergers and acquisitions. This outlook is bolstered by the company’s anticipated year-over-year aggregate pricing growth, which is expected to be in the mid-single digits percentage range. InvestingPro data shows the company’s current EBITDA stands at $465.7 million, with a healthy gross profit margin of 19.7%.

The recent completion of Knife River’s acquisition of Strata on March 10, 2023, valued at $454 million, is also expected to contribute positively to the company’s financials. The acquisition is forecasted to add approximately $50 million to Knife River’s annualized EBITDA and to enhance overall margins, given Strata’s margins exceed 20%, compared to Knife River’s corporate average of 16%.

Oppenheimer’s reiteration of the Outperform rating reflects their continued optimism about Knife River’s performance and strategic acquisitions. The firm anticipates that these factors, along with the company’s solid pricing strategy, will contribute to Knife River’s financial growth and help the company achieve its margin targets. InvestingPro analysis reveals the company maintains strong financial health with a "GREAT" overall score, operating with moderate debt levels and ample liquidity to cover short-term obligations. For deeper insights into Knife River’s financial metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Knife River Corporation reported a revenue of $2.9 billion for the 12 months ending September 30, 2024. Moody’s Ratings has upgraded Knife River’s corporate family rating to Ba1 from Ba2, reflecting expectations of solid credit metrics and positive free cash flow despite increased capital investments. The company plans to use proceeds from proposed senior secured bank credit facilities to refinance existing debt and acquire Strata Corp for approximately $454 million, expanding its geographical presence in North Dakota and Minnesota. Additionally, Knife River announced that Vice President of Administration Nancy K. Christenson will retire in April 2025, as disclosed in a filing with the U.S. Securities and Exchange Commission. The company recently changed its name from Knife River Holding Co. to Knife River Corporation, aligning with its evolving business model. Moody’s noted that Knife River’s liquidity remains strong, with expected annual cash flow from operations between $350 million and $375 million over the next two years. The stable outlook for Knife River is based on anticipated good operating performance and adherence to conservative financial policies. Investors are closely monitoring these developments, especially the executive changes, as they may influence the company’s strategic direction.

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