5. Knife River Corp. (NYSE: KNF)
TTM Net Income: $197.7 million
Number of Hedge Fund Holders: 37
Knife River Corp. (NYSE:KNF) is a construction materials and services company operating primarily in the western US. It specializes in aggregates, asphalt, ready-mix concrete, and construction. It also provides construction services, such as road construction, earthwork, and site development. The focus on the construction industry and its strong regional presence make it a significant player in its market.
This company uses a strategic plan under the name of EDGE to drive long-term profitable growth. It focuses on improving EBITDA margin through price optimization, cost control, and efficient execution. Additionally, the plan emphasizes discipline, growth, and excellence in all areas of the business.
It has several deals in its pipeline, ranging from small acquisitions to midsize bolt-on and new platforms. It has completed over 85 acquisitions. The experienced team positions it as the acquirer of choice in midsize high-growth markets.
In the second quarter of this year, the company expanded its teams to 10, focusing on all aspects of business. The PIT crews have visited 98 sites across 10 states, resulting in 1300 improvement opportunities (60% completed). Examples include new mining practices in Medford, Oregon ($1 million annual benefit), reconfigured sand washing equipment in Casper, Wyoming ($200,000 annual benefit), and reintroduced quarry byproduct in Portland, Oregon ($1.1 million annual benefit).
Revenue in Q2 2024 was $806.90 million, up 2.76% from a year-ago period. The company earned $1.37 per share in this quarter. Price increases, increased contracting services, and favorable market conditions drove revenue growth. Weather and lower input costs led to revenue declines in specific segments.
The company’s strong financial performance is driven by its strategic initiatives. With a strong balance sheet and positive market outlook, Knife River Corp. (NYSE:KNF) is well-positioned for continued growth and success.
Longleaf Partners Small-Cap Fund stated the following regarding Knife River Corporation (NYSE:KNF) in its fourth quarter 2023 investor letter:
“Knife River Corporation (NYSE:KNF) – Construction materials and contracting company Knife River was a top contributor for the year and for the quarter. We initiated the position this year after it was spun out of MDU Resources Group, a utility holding company in North Dakota. We were familiar with the business from previous work done on MDU. Knife River was the business that originally attracted us to MDU, and the spin gave us the opportunity to buy the best business as a standalone stock at a discount when utility shareholders focused on a steady dividend dumped it. The business had not been optimized for a long time under MDU but still delivered solid mid-single digit revenue growth over the prior decade. We believe CEO Brian Gray and his plan to improve cash flow represents an improvement over the previous path. Knife River reported strong results in its first two quarters, beating expectations and company guidance.”
