Ecolab (ECL) faces raw material inflation starting in Q2 due to higher oil prices, but energy surcharges should offset those headwinds and drive margin growth in Q3, RBC Capital Markets said in a report emailed Thursday.

The company is positioned for gross margin expansion by moderating raw material input cost and pricing actions, analysts wrote, adding that the company's digital innovation should also drive higher profitability.

For 2026, the brokerage said it expects adjusted EPS of $8.53 and revenue growth of 8.1%. For Q1, it modeled adjusted EPS of $1.70 on revenue growth of 8.2%.

Ecolab's supply chain remains solid, but energy markets are priced globally, and will impact the company's cost base, according to the note.

The company recently imposed a global energy surcharge in response to the Middle East conflict, which it expects to deliver value to customers that will exceed the price hike over time, according to the note.

The brokerage reiterated its outperform rating on the stock and price target of $337 per share.

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