RPM International's (RPM) pricing power in the current inflationary cycle, favorable end market exposure and cost savings create an attractive setup, UBS Securities said in a note Tuesday.

Analysts said they expect spending outside the residential housing market to improve in H2, as well as an increase in manufacturing and industrial-linked capital spending, which are likely to boost RPM's sales volumes in the Performance and Construction segments.

Lower inflation for raw materials and a faster pricing response may limit margin decline in fiscal 2027, the brokerage said, adding that RPM's margins could expand by about 200 basis points in fiscal 2028 as pricing picks up and costs of raw materials decline, driving an earnings per share growth of roughly 22%.

RPM is set to present a cost savings plan in the next few months, which UBS believes would aim for lower selling, general, and administrative expenses and target earnings before interest and taxes margins of around 16%.

The brokerage increased its estimates for fiscal 2027 and 2028 adjusted EPS by 9% and 4%, respectively.

UBS upgraded RPM to buy from neutral and raised the price target to $130 from $118.

Shares of RPM were up more than 3% in Wednesday trading.

Price: 106.39, Change: +3.49, Percent Change: +3.39