Investment Thesis
Knife River Corp is in financial distress with negative gross margins (-0.7%), deeply negative free cash flow (-135.9M), and critically low cash reserves (13.3M) relative to 1.4B in long-term debt. Despite 8.5% revenue growth, the company cannot convert sales into profitability or positive cash generation, indicating fundamental operational challenges in its nonmetallic minerals business that make debt service unsustainable.
Strengths
- Revenue growth of 8.5% YoY demonstrates continued market demand for products
- Current ratio of 2.67x suggests near-term liquidity is not immediately critical
- Stockholders' equity of 1.6B provides some residual balance sheet cushion
Risks
- Negative gross margin of -0.7% indicates core business operations are unprofitable before overhead costs
- Free cash flow of -135.9M with only 13.3M cash on hand creates unsustainable cash burn trajectory
- Operating cash flow is negative at -58.5M, meaning company cannot generate cash from normal business operations
- Long-term debt of 1.4B with negative interest coverage ratio (-6.2x) creates debt service risk
- Capital expenditure of 77.3M amid operating losses suggests misaligned capital allocation strategy
Key Metrics to Watch
- Gross margin trajectory - must return to positive territory for long-term viability
- Operating cash flow - urgently needs to turn positive to sustain operations
- Cash balance and cash burn rate - current 13.3M reserve depletes rapidly at current burn rate
- Debt refinancing timeline and covenant compliance with negative earnings
Financial Metrics
Revenue
410.1M
Net Income
-79.2M
EPS (Diluted)
$-1.40
Free Cash Flow
-135.9M
Total Assets
3.8B
Cash
13.3M
Profitability Ratios
Gross Margin
-0.7%
Operating Margin
-21.0%
Net Margin
-19.3%
ROE
-5.1%
ROA
-2.1%
FCF Margin
-33.1%
Balance Sheet & Liquidity
Current Ratio
2.67x
Quick Ratio
1.31x
Debt/Equity
0.92x
Debt/Assets
59.2%
Interest Coverage
-6.17x
Long-term Debt
1.4B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-07T09:30:05.660130 |
Data as of: 2026-03-31 |
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