Costain Group – this infrastructure group is ‘shaping, creating and will certainly be delivering’ over the next few years, shares 160p, TP 215p

Mark Watson-Mitchell - 21.01.2026

Yesterday’s confident Trading Update from the Kier Group (LON:KIE) could well prove to be a positive pointer for another infrastructure business.

Next Monday morning, 26^th January, will see the Costain Group (LON:COST) issue a Trading Update for the year to end-December 2025.

The Business

Costain has been improving the lives of people for more than 160 years, 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.

It offers a unique mix of construction, consultancy, engineering and digital services, working strategically with its customers and suppliers to meet critical national needs.

It operates through two main segments: Natural Resources and Transportation.

The company offers various services, such as consultancy and advisory, digital technology solutions, and complex program delivery.

It shapes, creates and delivers pioneering solutions that transform the performance of the infrastructure ecosystem.

Management Comment

At the time of announcing the group’s First Half results, CEO Alex Vaughan stated that:

"We have delivered another strong performance in the first half of 2025.

Growth in adjusted operating profit and margin reflects the improving quality of our contract portfolio, and we remain confident that we will deliver our adjusted operating margin run-rate target of 4.5% during FY 25, building on the significant growth in adjusted operating profit achieved since FY 21.

Our strong net cash position, progression in our dividend and share buyback programme are creating substantial value for shareholders.

We continue to win new work and add new customers in growth markets that provide essential infrastructure, expanding our forward work position to £5.6bn, more than four times FY 24 revenue.

We have already secured 90% of our forecast revenue for the year and our bidding activity levels remain high.

The Government's new Infrastructure Strategy and Infrastructure Pipeline, together with recent regulatory determinations in water, energy and aviation, provide clarity and confidence in the significant growth opportunities in our target markets.

We are delivering our strategic priorities, investing in the business to support these attractive growth opportunities and are increasingly confident in the Group's growth prospects."

With reference to the group’s Outlook the company stated that following the greater clarity provided by the Government's commitments in its recent 10-year Infrastructure Strategy and Infrastructure Pipeline, together with the significant increase in committed regulatory investment in key sectors of water, energy and aviation, there is real momentum in its chosen markets of Transport, Water, Energy, and Defence and Nuclear Energy.

The Management remains mindful of the near term macro-economic and geopolitical environment and the potential consequences of government spend phasing decisions, the improvements in market outlook and the group's positioning and resilience underpin its confidence in delivering on its expectations for further progress in FY 25 and FY 26, with a step change in performance expected in FY 27 and beyond.

The Equity

There are some 268.77m shares in issue.

The larger holders include Gresham House Asset Management (8.70%), UBS Asset Management (UK) (8.29%), Ennismore Fund Management (6.71%), JO Hambro Capital Management (5.03%), FIL Investment Advisors (4.05%), Artemis Investment Management (3.18%), OP Asset Management (3.05%), KBI Global Investors (2.72%), and CACEIS Bank (2.14%).

Brokers Views

There are six broking firms following the group.

The average of the analyst consensus is for a 185p Target Price, with the highest being 215p and the lowest being 150p a share.

Two weeks ago, Berenberg raised its Costain ‘Buy’ price target to 190p (175p).

Analyst Max Hayes, at Cavendish Capital Markets, looks for sales of £1,145m in 2025, with £47.0m profits, 13.1p earnings and a 2.8p dividend.

For 2026, his figures suggest £1,272m sales, £53.0m profits, 14.8p earnings and a dividend of 2.8p per share.

Looking into 2027, he has £1,394.5m sales, £59.6m profits, 16.6p of earnings and a much heathier dividend of 4.6p per share.

Hayes has a Buy out on the shares with a 215p Target Price.

Analysts Joe Brent and Joe Walker, at Panmure Liberum, rate the group's shares as a Buy, with a 190p Target Price.

For 2025 they look for group sales to be lower at £1,109m (£1,251m), with pre-tax profits of £52.1m (£48.5m), generating earnings of 14.4p (14.4p) but paying out a dividend of 3.0p (2.4p) per share.

For the 2026 year now underway, they anticipate a recovery in revenues to £1,275m, with £56.4m profits, generating 15.9p per share in earnings and paying out a 3.1p per share dividend.

They estimate that the 2027 year could see £1,402m turnover, £63.0m profits, giving 17.7p in earnings and a 3.2p per share dividend.

My View

Considering the group’s Order Book and balance sheet strength, I consider that the above analysts are being too conservative in their Target Prices.

With the shares at 159.60p, the group is only capitalised at £429m, a third of which is in cash, so 199.50p looks to be an easily achievable 2026 Target Price.

(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)

Costain Rail