Knife River Earnings Call Highlights Backlog-Fueled Momentum

Knife River Corporation ((KNF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Knife River Corporation’s latest earnings call struck an upbeat tone, as management highlighted record backlog, accelerating margins and a robust balance sheet that together outweighed pockets of regional softness and near-term cost pressure. Executives pointed to strong fourth-quarter results and multi-year EBITDA growth as evidence that their strategy is working, while acknowledging weather volatility and non-recurring gains that will make 2026 a more normalized year.

Record Backlog Underpins Revenue Visibility

Knife River entered 2026 with a record $1 billion backlog, up 38% from the prior year and heavily weighted to public infrastructure work, which makes up roughly 90% of the total. Management expects about three-quarters of this backlog to convert in 2026 and noted that the company has more asphalt paving booked than it performed in all of 2025, providing unusually strong near-term visibility.

Steady Full-Year EBITDA Growth

For fiscal 2025, adjusted EBITDA rose 7% to $497 million, extending a multi-year run of profitability gains. Over the past three years, adjusted EBITDA has climbed 58%, signaling that Knife River’s portfolio shifts, pricing actions and efficiency programs are translating into durable earnings power rather than a one-off spike.

Fourth Quarter Delivers Standout Results

The fourth quarter was a major highlight, with adjusted EBITDA surging 47% from the prior-year period and gross profit up 27%. Knife River reported a record gross margin near 19% for the quarter, and adjusted EBITDA margin improved roughly 340 basis points over the multi-year period, underscoring ongoing mix improvement and cost discipline.

Materials Segment Fires on All Cylinders

Aggregates, ready mix and asphalt all posted strong metrics, showcasing the power of Knife River’s materials-led model. Aggregates volumes grew 17% in the quarter with pricing up around 8% to 9% and gross margins up about 200 basis points, while ready mix volumes jumped 20% and gross margins improved roughly 230 basis points with management eyeing mid-teens ready mix volume growth in 2026.

Asphalt Margins and Volume Outlook Improve

Asphalt also turned in robust results, with fourth-quarter margins improving by about 400 basis points and internal sales volumes increasing more than 8%. Looking into 2026, the company is targeting mid-single-digit asphalt volume growth and expects margins to be broadly comparable to 2025, supported by more self-performed paving work flowing from the backlog.

Construction and Contracting Benefit from Infrastructure Tailwinds

Construction revenue in the Mountain region climbed roughly 20% in the quarter, and contracting services revenue rose 15%, helped by an extended construction season in the Mountain markets that delivered more than 20% growth. Management emphasized that federal, state and local infrastructure funding remains supportive, noting that about 46% of IIJA funds in its 14 operating states have yet to be dispersed, signaling a multi-year demand runway.

Active M&A and Heavy Capital Investment

Knife River was aggressive on capital deployment in 2025, completing five acquisitions including its largest ever, Strata, and investing about $789 million across deals, reserve expansions and organic projects. The company said its M&A strategy remains focused on aggregates-based, vertically integrated bolt-on targets in mid-sized, faster-growing markets, aiming to deepen materials control and enhance pricing power.

Balance Sheet Supports Further Growth

The company closed 2025 with roughly $75 million in unrestricted cash and about $475 million of availability on its revolving credit facility, leaving net leverage at 2.2 times EBITDA, comfortably below its 2.5 times long-term target. Maintenance capital expenditure was around $170 million, or 6% of revenue, and 2026 plans call for about $131 million of additional spending on reserves and organic growth projects on top of steady maintenance outlays.

Operational Self-Help and Safety Gains

Management credited internal “self-help” initiatives for much of the margin expansion, including dynamic pricing, “pit crew” cost-reduction programs and standardization of best practices across markets. Over several years, these efforts have lifted aggregate gross margins by about 450 basis points, ready mix margins by roughly 300 basis points and contracting services margins by about 280 basis points, while the company also reported its safest year on record.

Oregon Remains a Relative Weak Spot

Performance was not uniform across the footprint, with Oregon standing out as a laggard despite a roughly flat state DOT budget, as backlog and activity in the region declined. Management expects Oregon’s 2026 results to be broadly similar to 2025, framing the state as a continuing headwind that dampens otherwise strong margin performance in the higher-return West segment.

Contracting Margins Under Near-Term Pressure

Contracting services gross margins declined in 2025, consistent with management’s prior guidance that lower-margin backlog and project timing would weigh on results. While Knife River sees improvement ahead as more asphalt work is self-performed and mix improves in 2026, executives noted that contracting backlog margins are still below levels seen a year ago, tempering expectations for a sharp snapback.

Higher SG&A Reflects Growth Investments

Selling, general and administrative expenses rose in 2025, driven largely by administrative costs tied to the five acquisitions and increased spending on business development and the company’s “edge team” initiatives. Management expects SG&A to remain roughly in line as a percentage of revenue in 2026, suggesting that the recent increase represents a near-term drag in service of longer-term scale and capability gains.

Weather and Seasonality Add Earnings Noise

Weather was another swing factor, with 2025 starting slower than expected as unfavorable conditions weighed on first-quarter volumes and created an estimated 8% seasonal headwind, including integration effects from the Strata deal. By contrast, favorable weather in the fourth quarter extended the construction season and boosted results, highlighting the inherent volatility that can complicate quarterly comparisons even amid structural growth.

Managing Input Costs and Pricing Volatility

Volatile pricing for liquid asphalt and cement continues to challenge Knife River’s ability to maintain its price-cost spread in asphalt and ready mix, even as dynamic pricing tools have supported margin gains. Management said it successfully navigated these pressures in 2025 but cautioned that swings in key input prices remain a risk to future margin realization and will require ongoing vigilance.

Non-Recurring Gains Distort Year-on-Year Comparisons

Reported 2025 results benefited from elevated gains on the sale of assets, including a notable transaction in East Texas that boosted earnings but will not repeat. Management stressed that these one-time items are excluded from the 2026 outlook, meaning investors should treat some of 2025’s upside as non-recurring when modeling forward earnings.

Data Center Work Still an Unpriced Upside

Knife River is in discussions on roughly 21 data center-related projects, reflecting the potential construction and materials demand from the digital infrastructure build-out, but has yet to convert those opportunities into backlog. Executives emphasized that essentially no current backlog or guidance midpoint assumptions factor in data center work, leaving this as a possible upside catalyst rather than a base-case driver.

Forward Guidance Points to Continued Expansion

Looking ahead to 2026, Knife River guided to consolidated revenue of $3.3 billion to $3.5 billion and adjusted EBITDA of $520 million to $560 million, implying an adjusted EBITDA margin around 16% at the midpoint, assuming normal conditions. The company expects mid-single-digit volume and pricing growth in aggregates with roughly 200 basis points of margin expansion, mid-teens ready mix volume growth, mid-single-digit asphalt volume growth with steady margins and better contracting services margins as more asphalt is self-performed, all supported by record backlog, disciplined capex and ample liquidity.

Knife River’s earnings call painted the picture of a materials-led infrastructure player moving into 2026 with strong momentum, anchored by record backlog, solid pricing and a balance sheet ready to fund continued growth. While regional softness, margin pressure in contracting services, higher SG&A and weather volatility introduce some noise, management’s emphasis on operational discipline and normalized guidance suggests the trajectory remains firmly upward for investors watching this name.