VMC - Watch For Flying Knives: Knife River Looks Quite Good But Valuation Isn't Low
2024-04-15 12:06:46 ET
Summary
- Demand for aggregates in 2024 should be quite healthy as public works projects move forward, benefiting Knife River and its leading share across its Northwest/North U.S. footprint.
- Management's guidance for 2024 may be too conservative given strong trends in its business footprint. Volumes are likely to be pressured by more selective bidding, but aggregate pricing could surprise.
- Knife River's margins are a valid talking point, but the company is moving on opportunities to improve them through its ongoing EDGE plan and potential M&A.
- Valuation isn't much of a bargain today and the stock likely needs beat-and-raise quarters to maintain the momentum; macro trends are supportive, but that adds to the risk.
Materials businesses aren't very sexy, but they can generate good earnings and cash flows when demand is high, and I expect demand for aggregates to be pretty solid in 2024 as public works projects move forward across the country. That's good news for Knife River Corporation (KNF), and I think management guidance for 2024 may be too conservative given strong trends across much of its business footprint....
Watch For Flying Knives: Knife River Looks Quite Good, But Valuation Isn't Low