Knife River NYSE: KNF reported a stronger first quarter as higher activity across its markets lifted volumes, revenue and adjusted EBITDA, while management reaffirmed full-year guidance and said results are currently tracking toward the upper half of its outlook ranges.
President and Chief Executive Officer Brian Gray said the construction materials and contracting company increased revenue by 16% and adjusted EBITDA by 16% year over year in the quarter. Adjusted EBITDA margins expanded by 290 basis points, supported by double-digit volume growth across product lines, cost controls and pricing initiatives.
“We are just now entering the start of our construction season, and we are doing so from a position of strength,” Gray said. He cited a record first-quarter backlog of $1.2 billion in contracting services and the completion of three aggregates-based acquisitions during the period.
Volumes Rise Across Core Product Lines
Chief Financial Officer Nathan Ring said Knife River achieved volume, revenue and gross profit improvement in aggregates, ready-mix and asphalt.
- Aggregates: Volumes rose 26%, helped by higher activity in Oregon and favorable weather in the Mountain segment. Ring said per-unit production costs fell by more than 10% due to process improvements and prior operational investments.
- Ready-mix: Volumes increased 33%, with the Texcrete acquisition driving a more than doubling of first-quarter volumes in Texas.
- Asphalt: Volumes increased 42% year over year, though Ring noted the first quarter represents less than 5% of full-year asphalt volumes.
- Contracting services: Revenue increased across all segments, with the largest gains in Central, led by Texas and North Dakota. Margins declined in the quarter, which Ring attributed to project timing, work type and geographic mix in a seasonally small period.
Ring said approximately 75% of the $1.2 billion backlog is expected to be completed in 2026. He said the backlog includes a higher level of asphalt paving work, which management expects to support contracting margins and pull through higher-margin upstream materials.
Management Highlights Midsize Markets and Vertical Integration
Gray devoted part of the call to Knife River’s growth strategy, emphasizing the company’s presence in “midsize, higher growth markets,” vertical integration, margin improvement efforts and its internal culture.
Gray said population growth in states where Knife River operates has outpaced non-Knife River states over the past decade and is projected to grow twice as fast from 2025 through 2050. He also said state transportation department budgets in Knife River states rose approximately 15% this year, compared with flat budgets in non-Knife River states.
Gray described vertical integration as a “profit multiplier,” saying Knife River can capture higher margins by supplying upstream materials to its own construction projects while also benefiting from synergies in equipment utilization, overhead absorption and labor efficiency. He said the structure gives the company multiple ways to participate in construction projects, including as a general contractor, subcontractor, materials supplier or downstream producer.
As an example, Gray cited Knife River’s Honey Creek Quarry near Austin, Texas, which supports downstream product lines and third-party customers. He said the quarry is supplying materials for an expanded asphalt plant in Bryan, Texas, and for the recently acquired Texcrete ready-mix operations in College Station.
Acquisitions Expand Footprint in Utah and Montana
Knife River completed three acquisitions during the first quarter: Morgan Asphalt in the Salt Lake City market, Sparrow Enterprises in Montana and Donaldson Brothers Ready Mix in Montana. Gray said all three were aggregates-based operations with downstream materials, and Morgan Asphalt also included contracting services opportunities.
Gray said the deals were negotiated directly with owners at “high single-digit multiples.” He highlighted Morgan Asphalt as the largest and most strategically meaningful acquisition, calling it an aggregates-based platform in Utah that Knife River had been seeking for years.
“This is not a new market for us,” Gray said of Utah, noting the company has performed work in the state from its Boise, Idaho, group. He said Morgan Asphalt brings a strong reserve position and asphalt paving capabilities.
Ring said newly acquired businesses can benefit from Knife River’s purchasing power for items such as cement, oil and equipment, as well as from operational efficiency initiatives and back-office synergies.
Pricing, Energy Costs and Margin Outlook
Aggregates pricing was up 1% on a reported basis in the quarter. Gray said that figure was affected by geographic mix, particularly strong growth in the Mountain region, where costs and prices are lower than in other regions. Adjusted for segment mix, he said aggregates pricing was up 4.1%.
Knife River reaffirmed its expectation for mid-single-digit aggregates pricing improvement for the full year on a reported basis and at least 200 basis points of aggregate margin expansion. Gray said the company’s aggregates gross profit margin increased 390 basis points in the first quarter.
Management also addressed higher energy costs. Ring said Knife River uses diesel pre-purchases, energy escalation clauses in construction contracts and fuel surcharge clauses in materials deliveries. Gray said dynamic pricing has become an important tool, allowing the company to incorporate current diesel costs into bids on a daily basis. He estimated Knife River is protected through mitigation practices on about 80% of its annual diesel use.
Guidance Reaffirmed, With Results Trending Higher
Ring said Knife River is maintaining the full-year guidance it issued in February, as the company generally does not revise guidance until the construction season is further underway. However, he said the strong start to 2026 and the three acquisitions give management confidence that revenue and adjusted EBITDA will trend toward the upper half of the company’s guidance ranges.
Ring said Knife River spent $42 million in the quarter on maintenance and improvement capital expenditures, largely for construction equipment replacement and plant improvements. The company also spent $209 million on growth initiatives, including $174 million on acquisitions and $35 million on aggregate expansions and greenfield projects.
Ring said the company expects to end 2026 with no borrowing on its $500 million revolving credit facility and cash on hand, resulting in anticipated net leverage near its long-term target of 2.5 times. He said Knife River has the liquidity and balance sheet capacity to continue pursuing acquisitions, including the possibility of moving near 3 times leverage for a short period for the right deal.
Gray closed the call by saying Knife River is entering the construction season with record backlog, improved cost discipline and an acquisition strategy that continues to enhance results. “We believe the progress we’re making today positions Knife River to generate profitable growth in 2026 and well beyond,” he said.
About Knife River NYSE: KNF
Knife River Corporation, headquartered in Bismarck, North Dakota, is a leading integrated construction materials and contracting company in the western United States. The company specializes in producing and supplying aggregates, asphalt mix, ready-mixed concrete and other heavy construction materials used in highway, commercial and residential projects.
In addition to material production, Knife River offers a comprehensive suite of contracting services, including heavy civil construction, road building, underground and open-pit mining and logistics support.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Knife River, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Knife River wasn't on the list.
While Knife River currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Discover the next wave of investment opportunities with our report, 7 Stocks That Will Be Magnificent in 2026. Explore companies poised to replicate the growth, innovation, and value creation of the tech giants dominating today's markets.
Get This Free Report
