Knife River Q3 Revenue Rises 6% as Margin Narrows

Knife River Corp. (NYSE: KNF) reported a 6% increase in third-quarter 2026 revenue as higher aggregates volumes and pricing supported sales, but adjusted EBITDA was essentially flat and margins narrowed amid weaker contracting activity, project delays and elevated diesel costs. The construction-materials company also outlined its Sharper EDGE initiatives, a set of operational, commercial and organizational measures intended to improve profitability.

Revenue rose to $1.276 billion for the three months ended Sept. 30 from $1.204 billion a year earlier. Adjusted EBITDA was $271.7 million, compared with $272.8 million, while adjusted EBITDA margin declined to 21.3% from 22.7%. Net income fell to $137.9 million from $143.2 million, and net income margin decreased to 10.8% from 11.9%.

For the first nine months of 2026, revenue increased to $2.624 billion from $2.391 billion. Adjusted EBITDA edged up to $379.6 million from $377.1 million, but adjusted EBITDA margin fell to 14.5% from 15.8%. Nine-month net income declined to $102.6 million from $125.1 million.

Aggregates Strength Offset by Contracting and Cost Pressures

Aggregates were the quarter’s strongest product line. Volumes increased 10% to 12.7 million tons, while average selling price rose 4% as reported to $19.59 per ton. On a product mix-adjusted basis, aggregates pricing increased 5.9%.

Aggregates gross profit climbed 24% to $74 million, and gross margin reached a third-quarter record of 29.6%, up 240 basis points from 27.2% a year earlier. Knife River attributed the performance to commercial and operational measures including increased external sales, dynamic pricing, enhanced quoting tools and higher asphalt paving activity. Variable production costs declined 5% year over year, while plant run-time percentage improved 4%.

Results were weaker across several other product lines. Ready-mix gross profit decreased 5% to $50 million despite a 1% increase in volume and a 3% rise in average selling price. Asphalt gross profit fell 4% to $39 million even as volumes increased 8%; average selling price declined 1%. Contracting-services gross profit dropped 17% to $28 million, while liquid-asphalt gross profit declined 20% to $51 million.

The company identified three principal quarterly headwinds. Market dynamics, including fewer public project lettings, fewer late-season jobs and a lower-margin work mix, reduced adjusted EBITDA by about $15 million. Project delays, which pushed work into 2027 without cancellations, had an estimated $5 million impact. Higher energy costs reduced adjusted EBITDA by a net $10 million as diesel prices rose about 40% during the quarter and cost recoveries lagged.

Knife River said it expects second-half 2026 contracting margins of approximately 8% to 9%. Its responses include expanding private work, resizing crews and equipment, increasing third-party sales, redeploying workers to active projects and bidding as both a general contractor and subcontractor. The company is also using fuel surcharges, contract escalators and dynamic pricing to recover higher costs.

Sharper EDGE Targets Further Self-Help Gains

Knife River’s Sharper EDGE program builds on its existing EDGE framework and focuses on improving productivity and costs, obtaining full value for products and streamlining support functions. Planned operational measures include plant reconfiguration and automation, improved mine planning, greater equipment utilization, bulk purchases of cementitious materials and further optimization of ready-mix and asphalt designs.

The company plans to deploy more than $125 million over the next three years on aggregates initiatives, targeting an incremental gross-profit improvement of more than $1 per ton. Commercial priorities include greater use of real-time sales dashboards and transaction software, more third-party aggregates sales and expansion into private projects involving data centers, power generation and semiconductor facilities.

Knife River also plans to standardize administrative processes, use technology to shorten billing and approval timelines, and further leverage its purchasing scale. These organizational measures are designed to support operations and reduce selling, general and administrative expenses as a percentage of revenue.

2026 Guidance and Capital Allocation

Knife River’s full-year 2026 guidance calls for revenue of $3.375 billion to $3.425 billion and adjusted EBITDA of $475 million to $505 million. The outlook assumes normal weather, economic and operating conditions and excludes potential acquisitions.

The company expects aggregates pricing to increase by a mid-single-digit percentage, with aggregates volumes rising by a high-single-digit to low-double-digit percentage. Ready-mix and asphalt volumes are also expected to grow at high-single-digit to low-double-digit rates. Depreciation, depletion and amortization is projected to increase by a mid-teens percentage.

Capital spending is expected to equal 5% to 6% of 2026 revenue. During the third quarter, Knife River spent $37 million on maintenance and improvement projects and $21 million on growth investments. Current projects include a rail-served aggregates expansion in South Dakota, expected to be completed in 2027, and ready-mix investments in Idaho, Minnesota and Texas.

At Sept. 30, the company had $566.2 million of available liquidity. Net debt was $1.452 billion, representing 2.9 times trailing-12-month adjusted EBITDA, compared with its long-term net leverage target of 2.5 times.

Knife River said its outlook remains subject to weather, economic and operating conditions. Additional uncertainties include the timing of public project awards, further construction delays, energy-price volatility, the pace of cost recovery and the company’s ability to realize the expected benefits of its EDGE and Sharper EDGE initiatives.