What the Potential Peace/Settlement Means for Chemical Stocks

Research evidence excerpt

What the Potential Peace/Settlement Means for Chemical Stocks

we could see demand on a stronger footing as well (but this remains to be seen given continued tariff

concerns, etc.). All of this should help the coatings stocks recapture some of the stock decline they saw

from the pre-war levels.

ECL. The stock fell 20% from its pre-war high to its May low, and while some of the dip was tied to

the CoolIT transaction, more than half (13%) came before the acquisition was announced. Much of the

concern was that ECL had struggled in 2022 on managing price vs. raw materials and investors were

afraid to see the company stumble in this new inflationary period. That said, with management having

been in the seat for years and having worked through the past inflationary period, ECL was better

prepared to guide investors and manage the company through this inflationary upturn. With a 10-14%

surcharge/hike announced that gave the company cover for a much-lower need for pricing to offset

raws, in our view, ECL was in solid shape to weather the pressures. Management guided to a modest

low-single-digit price lift in 2Q, growing higher in 2H, which would more than offset costs. With raws

likely to come down in 2H on the peace deal, ECL may give back some of the pricing that was pushed as

a surcharge (albeit with a lag and mainly in Water vs. Institutional where it was largely structural), but

we believe some will stick as new pricing, which will help margins in 2027.

With all of this, the stage is set for ECL's core business to continue to deliver low- to mid-teens EPS

growth pre-CoolIT. With CoolIT closing roughly mid-year, the dilution will take ECL's EPS down temporarily

(management has pointed to $0.20/quarter to start), but this will soon be looked through, setting the