Knife River Cuts 2026 Outlook After Contracting Drag

The Tip Desk · November 10, 2026 · 4 min read

Third-quarter revenue reached $1.28 billion as aggregate gross margin hit a seasonal record 29.6%, while the company lowered full-year Adjusted EBITDA guidance to $475 million–$505 million.

Knife River Corporation (KNF), an aggregates-based, vertically integrated construction materials and contracting services company, reported third-quarter revenue of $1.28 billion, up 6% from a year earlier, as year-over-year growth slowed from 13% in the second quarter.

Net income was $137.9 million, or $2.43 a share, down 4% from $143.2 million, or $2.52 a share, a year earlier. Net income margin was 10.8%. Adjusted EBITDA was essentially unchanged at $271.7 million, with the Adjusted EBITDA margin at 21.3%.

President and CEO Brian Gray said the company delivered a solid quarter in a challenging operating environment, with more asphalt paving and aggregate demand lifting revenue. Internal pull-through and higher third-party sales drove a 10% increase in aggregate volumes, to 12.747 million tons. Aggregate average selling price rose to $19.59 a ton from $18.78.

Aggregate gross margin improved 240 basis points to a third-quarter record 29.6%, from 27.2% a year earlier. Gray said the company raised aggregate pricing mid-single digits and reduced per-unit variable production costs.

Contracting services revenue rose to $604.6 million from $556.4 million. Contracting services gross profit fell to $51.2 million, an 8.5% margin, from $63.8 million, an 11.5% margin. Gray said second-quarter headwinds — market dynamics, project delays and higher fuel costs — carried into the third quarter and were most pronounced in contracting services. He said the company believes those headwinds are temporary and that teams are targeting more third-party materials sales, right-sizing crews and equipment where market conditions call for it, and pursuing more private-work opportunities.

Mountain revenue increased 34% to $308.1 million, with EBITDA up 10% to $55.8 million. The company said the revenue increase was largely driven by contracting services, higher volumes across product lines, higher ready-mix and aggregates pricing, and first-quarter acquisitions. EBITDA margin declined to 18.1% from 22.1%, reflecting the type of contracting work, including more asphalt paving, and increased competition.

West revenue decreased 8% to $365.8 million, primarily due to less available contracting services work in Oregon and California. EBITDA was $91.4 million. EBITDA margin improved 180 basis points to 25.0%, driven by aggregate margin expansion. Central revenue increased 6% to $462.0 million, with EBITDA up 2% to $102.1 million; EBITDA margin declined 90 basis points to 22.1%. Energy Services revenue was $168.4 million, while EBITDA fell 18% to $32.4 million and EBITDA margin declined to 19.3% from 23.4%.

Contracting services backlog was $857.2 million at September 30, 2026, down from $994.6 million a year earlier. West backlog was $167.3 million. The company said margins on backlog at September 30, 2026, are expected to be lower than those on backlog a year earlier, and that fewer bidding opportunities in certain markets compared with the same period last year. About 82% of contracting services backlog relates to publicly funded projects.

Knife River is updating full-year 2026 guidance to reflect continued near-term headwinds. It now expects revenue of $3.375 billion to $3.425 billion and Adjusted EBITDA of $475.0 million to $505.0 million, versus prior ranges of $3.400 billion to $3.600 billion and $520.0 million to $560.0 million. The company now expects aggregates volumes to increase high-single digits to low-double digits and pricing to increase mid-single digits. Ready-mix and asphalt volumes are expected to increase high-single digits to low-double digits. Depreciation, depletion and amortization is expected to increase mid-teens. The ranges assume normal weather, economic and operating conditions and exclude future acquisitions.

Gray said the company has begun implementing “Sharper EDGE” initiatives, building on the Competitive EDGE program that has delivered a 530-basis-point improvement in aggregate gross margin since 2023. He said the company has multiple paths to Adjusted EBITDA growth and margin expansion, including organic investments and an active M&A pipeline, and that it looks forward to discussing Sharper EDGE at an investor day in the coming months.

As of September 30, 2026, Knife River had $118.0 million of unrestricted cash and cash equivalents, $1.6 billion of gross debt and $448.2 million of available capacity under its revolving credit facility, net of outstanding letters of credit. Net leverage was 2.9x.