Downer shares edge higher after New Zealand contract win

The Downer EDI Ltd (ASX: DOW) share price is heading higher on Friday. This comes after the infrastructure group flagged another large contract win across New Zealand.

At the time of writing, Downer shares are up 0.89% to $7.94. In comparison, the S&P/ASX 200 Index (ASX: XJO) is also rising by 0.5% following modest gains on Wall Street overnight.

What was announced?

According to the release, Downer confirmed that it has been selected as the preferred contractor for four New Zealand state highway maintenance contracts awarded by the NZ Transport Agency, Waka Kotahi.

Subject to final contract terms, the work is scheduled to commence in May 2026 and will cover state highway networks in Central Waikato, Taranaki, Tairāwhiti, and Coastal Otago.

The contracts will span anywhere between 3 to 10 years. Downer estimates that it will receive around NZ$870 million (roughly A$760 million) in revenue from the early stages of the four regions.

The scope of work includes routine and non-routine inspections, pavement and surfacing renewals, drainage maintenance, traffic services, environmental maintenance, and emergency response.

Why this matters

The announcement isn't transformational, but it does reinforce Downer's position in these markets.

This is ongoing road maintenance work rather than large construction projects, which aligns with the company's focus in recent years on execution and margins.

Management also noted it already maintains more than 50,000 kilometres of road networks across Australia and New Zealand. That track record is often an advantage when governments are selecting contractors for essential maintenance road works.

Building on recent momentum

This update sits alongside a series of recent contract wins and operational improvements.

Downer has also continued to return capital to shareholders, with buybacks supporting earnings per share. Broker views have shifted gradually as a result, with some price targets raised following the company's recent updates and briefings.

As a result, Macquarie lifted its price target by 11% to $8.50, while UBS notched up its target by 6.7% to $8.

Key takeaway

The market response to the announcement has been subtle, which probably reflects the nature of the update.

This announcement doesn't change the near-term outlook for Downer, but it does add to the company's base of long-term contracted work. It also fits with the way the business has been positioned in recent years, with a clear focus on execution, margin control, and earnings visibility.

For me, it doesn't shift the buy or sell view. It's another reminder that Downer is a steady, long-term infrastructure business.

The post Downer shares edge higher after New Zealand contract win appeared first on The Motley Fool Australia.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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