Knife River shares target lifted by Loop Capital on positive outlook By Investing.com

Loop Capital has increased the price target for Knife River Corp. (NYSE: KNF) shares to $105 from the previous $89 while reiterating a Buy rating on the stock.

The firm’s optimism is rooted in the company’s consistent performance, which is expected to continue into the third quarter. Knife River’s diverse geographic presence, significant involvement in infrastructure projects, and downstream focus are believed to provide a buffer against various market challenges, such as weather risks, a slowdown in private construction, and issues with fixed cost absorption that are impacting others in the industry.

Loop Capital points out that Knife River’s initiatives, particularly the EDGE program, are anticipated to contribute to higher pricing in the second half of 2024. Despite potentially difficult comparisons with the fourth quarter of the previous year, which benefited from unusually favorable weather conditions, the current third-quarter trends are seen as more likely to bring positive surprises than negative ones when compared to Street expectations.

The firm’s decision to raise the price target by $16 is also influenced by the expanding multiples of downstream peers, which could provide additional valuation support for Knife River.

The company’s ongoing self-help earnings growth narrative and disciplined approach to mergers and acquisitions are expected to act as catalysts for earnings in the upcoming quarters, as per Loop Capital.

Knife River’s earnings per share reached $1.37, surpassing the consensus estimate of $1.24, while revenues were in line with projections. Analyst firms BofA Securities and DA Davidson have both expressed positive sentiments, raising their price targets for Knife River to $99 and $90 respectively, and maintaining their Buy ratings.

Knife River has also adopted a new Change in Control Severance Plan (CIC Plan) for its executive officers, providing them with certain benefits if their employment is terminated under specific conditions following a company control change. The company plans to modify its policy for employee equity awards, transitioning to a “double trigger” change in control vesting from 2025.

In addition to these developments, Knife River’s backlog remains robust at $989 million, primarily supported by public funding. This positions the company favorably in light of the pending allocation of a significant portion of the Infrastructure Investment and Jobs Act (IIJA) funding and proposed legislation in 14 states.

InvestingPro Insights

Knife River Corp.’s strong market position, as highlighted by Loop Capital, is further supported by recent InvestingPro data. The company’s stock has shown impressive momentum, with a 30.29% price return over the past three months and an 83.06% return over the last year. This performance aligns with Loop Capital’s optimistic outlook and increased price target.

InvestingPro Tips indicate that Knife River is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.53 for the last twelve months as of Q2 2024. This suggests the stock may be undervalued considering its growth prospects, which could support Loop Capital’s bullish stance.

Additionally, the company’s strong financial health is evident from its liquid assets exceeding short-term obligations, providing a solid foundation for its ongoing initiatives and potential M&A activities mentioned in the article.

For investors seeking a more comprehensive analysis, InvestingPro offers 9 additional tips for Knife River Corp., providing deeper insights into the company’s financial position and market performance.

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