Knife River: Lowering Estimates Post 2Q Results; PT Moves to $80

研报英文原文证据摘录

J P M O R G A N

North America Equity Research

07 August 2026

Knife River

Neutral

KNF, KNF US

Price (07 Aug 26):$66.80

Lowering Estimates Post 2Q Results; PT Moves to $80

▼Price Target (Dec-26):$80.00

Prior (Dec-26):$95.00

KNF’s 2Q results came in well below expectations on weaker-than-expected

margins despite strong vols, with headwinds from energy costs, delayed projects,

lower-margin contracting services work, and lower gains from asset sales. As a

result, we are lowering our FY26 EBITDA estimate to $545 mn (vs $560 mn

prior) or +10% y/y with EBITDA margin +0.2pp to 16.0% (-0.6pp vs prior).

The company raised FY26 revenue guidance to $3.4-3.6 bn (from $3.3-3.5 bn) but

maintained its EBITDA guide of $520-560 mn (+5 to +13% y/y) despite increasing

its DD&A outlook to a mid-teens increase (vs +mid-SD% prior) which implies a

~$20mn guide down ex. DD&A. The implied EBIT guide down is largely

attributable to lower asphalt bid margins, a portion of delayed projects that will be

pushed out to 2027 (~$7-8 mn), and a weaker bid environment in Oregon despite

stabilization in funding. For aggregates, we expect vols to be +8% y/y (vs +6.5%

prior) and pricing to be +4% (-1% vs prior) while we expect RM vols/pricing to be

+15%/+3% (-3%/flat vs prior), asphalt vols/pricing to be +9% and flat (+4%/flat

vs prior), and contracting services revenue +7% (+4% vs prior). The story

continues to center around margin improvement, and we believe the company has

multiple avenues for margin expansion, primarily within the aggs portion of its

business, which is now expected to be up ~100bp this year (vs ~200bps prior) due

to energy headwinds and unexpected project delays impacting aggs pull through.

While the company has been executing on margin enhancing initiatives, which

gives us more confidence in improving visibility to achieve its long-term target of

>20% consolidated EBITDA margin, the multitude of external headwinds to the

near- to mid-term outlook and valuation that still seems relatively fair keeps us on

the sidelines. All told, we maintain our relative Neutral rating but lower our

Dec-26 price target to $80 (from $95), which implies a 9.7x fwd EV/EBITDA

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