Costain Group – contract news is further evidence of revenue visibility and growth potential, shares 206p offer early 16.5% upside

Mark Watson-Mitchell - 15.07.2026

Ahead of announcing its Interim Results on Thursday 13th August, the £550m-capitalised Costain Group (LON:COST), one of the UK’s leading construction and infrastructure specialists, has this morning reported a significant contract extension.

It has secured a three-year extension to its Managed Service Provider contract with United Utilities, continuing its support for the AMP8 capital maintenance programme through the regulatory cycle.

This partnership, initially established in 2019, will now extend to a decade and potentially through AMP9 until 2035.

Costain's team of over 120 professionals delivers engineering, construction, asset optimisation, and project management services across the north west of England, having already completed over 900 capital maintenance projects and approximately 9,000 responsive maintenance activities.

This extension is significant as United Utilities plans to invest £13.5bn in regional water and wastewater infrastructure during AMP8, a substantial increase from AMP7's £3.8bn investment.

The Business

Costain declares that it is improving people's lives by creating connected, sustainable infrastructure that enables people and the planet to thrive.

Through the delivery of predictable, best-in-class solutions across the transport, water, energy and defence markets, it is creating a sustainable future and securing a more prosperous, resilient and decarbonised UK.

Management Comment

CEO Alex Vaughan stated that:

"We are a long-term, trusted partner to United Utilities and this latest extension is testament to our track record of delivering predictably and consistently.

Across the north west of England, we are working closely with United Utilities and our local supply chain partners to build critical resilience into the region's water and wastewater infrastructure.

We're continuing to achieve performance enhancing results by optimising existing assets and integrating engineering knowledge, innovation and best practice while maintaining the highest standards of safety and quality."

Broker’s Views

Analysts Joe Brent and Joe Walker, at Panmure Liberum, have this morning issued a Buy note on the group, with a 245p a share Target Price.

“Costain has announced this morning that it has extended its maintenance contract with United Utilities.

This follows on from the Norfolk Roads contract in June.

We estimate the UU contract is worth c.£200m over three years and should grow modestly relative to the previous contract.

This is in addition to the c.£900m capital budget with UU.

We expect a positive update on the 13th of August.

Given the growth, we assume a 67% weighting of EPS of to H2.

Maintain BUY and 245p TP; a CY 27 P/E of 11.1x is too cheap given the growth on offer.”

Over at Cavendish Capital Markets, analyst Max Hayes considers that this morning’s announcement is further evidence of Costain’s revenue visibility and growth potential.

Hayes has also issued a Buy note on the group, but with a very much higher 297p Target Price.

For the year to end-December 2026, he estimates that the group’s revenues will rise to £1,272.0m (£1,045.7m), with adjusted pre-tax profits of £53.0m (£53.6m), lifting earnings to 15.0p (14.7p) and increasing its dividend to 5.1p (4.2p) per share.

For 2027, he looks for £1,394.0m revenues, £59.6m profits, earnings of 17.3p and paying a 5.8p dividend.

Further growth is expected in 2028, to £1,467.6m sales, £64.3m profits, 18.7p earnings and a 6.3p dividend.

My View

The £550m valued group is likely to have over £170m cash on its balance sheet at the end of this year.

The shares of the Costain Group are an absolute bargain at 206p, on 13.7 times earnings.

I see them easily rising to 240p, then just 16 times earnings (the market average) – very cheap for such quality.

(Profile 05.09.19 @ 155p set a Target Price of 250p)

(Profile 02.08.21 @ 55p set a Target Price of 69p*)

(Profile 24.08.23 @ 50p set a Target Price of 62p*)

(Profile 20.08.25 @ 139p set a Target Price of 175p*)

(Profile 21.01.26 @ 160p set a Target Price of 199.50p*)

(Profile 02.03.26 @ 182p set a Target Price of 210p*)

(Profile 14.05.26 @ 196p set a Trading Range of 230p/260p)

Interims due next month