Investing.com -- Water solutions firm Ecolab’s shares rose after Citi initiated a positive catalyst watch on the stock, citing an improving cost environment and pricing momentum heading into the second half of the year.

While raw material costs remain a headwind in the second quarter, Citi expects that pressure to ease as energy costs decline in the back half (2H) of 2026, creating room for gross margin (GM) expansion.

“We see the pressure easing from lower energy cost environment in 2H, supporting favorable management commentary on GM expansion opportunities,” Citi analysts wrote.

The team also pointed to Ecolab’s track record of turning temporary surcharges into permanent structural pricing gains. "In the past, ECL had demonstrated converting these surcharges into structural pricing and we see the company repeating this again, as ECL defends price actions through deliverable value to customers," the analysts said.

Furthermore, Citi flagged two additional growth drivers for the second half. The expected close of the CoolIT acquisition in the third quarter is seen adding a favorable mix shift in the Water segment, given CoolIT’s exposure to higher-growth end markets.

In Life Sciences, the bank anticipates greater volume growth as additional production capacity comes online in the second half.

Ecolab agreed earlier this year to buy CoolIT Systems from KKR for about $4.75 billion in cash, betting on surging demand for data center cooling driven by artificial intelligence. CoolIT, whose customers include Nvidia and Advanced Micro Devices, designs and manufactures liquid cooling systems for hyperscale and colocation data center operators.

Ecolab expects the move to complement its existing water, chemistry and digital monitoring capabilities, positioning it as a more complete provider of cooling and fluid management solutions.

CoolIT is expected to generate roughly $550 million in revenue over the next 12 months, Ecolab said.