Navigating Asia's Reform and AI-Driven Outperformance in a Fed-Cutting World

The global investment landscape in 2025 is defined by a confluence of macroeconomic forces: Asia's structural reforms, the accelerating adoption of artificial intelligence (AI), and the Federal Reserve's rate-cutting cycle. These dynamics are reshaping the specialty chemicals sector, where companies like RPM International (RPM) are navigating both headwinds and tailwinds. The divergent ratings from UBS and Mizuho on RPM-Neutral and Outperform, respectively-highlight the nuanced interplay of these factors. This analysis unpacks the rationale behind these contrasting views, emphasizing how Asia's reforms and AI adoption are redefining sector fundamentals in a Fed-easing environment.

UBS's Neutral Stance: Caution Amid Structural Uncertainties

UBS analyst Joshua Spector maintained a Neutral rating on RPM in December 2025, lowering the price target to $119 from $127. This adjustment reflects a cautious outlook on the broader specialty chemicals sector, which faces challenges from weak global demand, trade policy volatility, and overcapacity in key markets like automotive and construction. While RPM's Q4 2025 results-$2.08 billion in sales and a 3.7% year-over-year revenue increase-demonstrate operational resilience, UBS emphasizes macroeconomic risks.

The firm's skepticism is rooted in Asia's mixed performance. Despite India's chemicals sector showing resilience with a 10–12% total shareholder return (TSR) since 2020, broader Asia-Pacific markets have struggled with low capacity utilization and weak commodity spreads. UBS also notes that while AI is driving innovation in construction chemicals, projected to grow to $84.22 billion by 2029, fragmented data systems and talent shortages in Asia are slowing adoption. For RPM, this means AI's benefits-such as predictive maintenance and supply chain optimization-are still emerging and may not offset near-term sector headwinds.

Mizuho's Outperform Rating: Betting on AI and Reform-Driven Growth

In contrast, Mizuho maintained an Outperform rating on RPM, with a price target of $128. The firm's optimism hinges on two pillars: Asia's corporate governance reforms and the transformative potential of AI. Mizuho's analysis underscores how countries like Japan and South Korea are leveraging reforms to boost shareholder returns and capital efficiency, creating a favorable backdrop for RPM's global operations. Additionally, the firm highlights RPM's strategic alignment with AI-driven supply chain optimization, a trend that Mizuho views as critical for industrial resilience.

Mizuho's rationale also incorporates the Fed's rate-cutting cycle. With the federal funds rate reduced to 4–4.25% in late 2025, Asian economies are gaining flexibility to cut policy rates and stimulate growth. This environment, combined with RPM's MAP 2025 initiatives-focused on operational efficiency and debt reduction-positions the company to outperform peers. Mizuho's analysts project a 6.66% annual revenue increase for RPM and a 10.29% rise in non-GAAP EPS, citing improved credit metrics and institutional ownership trends.

Contrasting Rationales: Macro vs. Micro Leverage

The divergence between UBS and Mizuho stems from their differing emphasis on macroeconomic risks versus micro-level opportunities. UBS prioritizes sector-wide challenges, such as China's trade disputes and sluggish industrial activity, while Mizuho focuses on RPM's ability to harness AI and Asia's reform-driven growth. For instance, UBS acknowledges China's cost-efficient AI strategy as a potential earnings driver, yet its Neutral rating suggests it views these benefits as insufficient to offset broader uncertainties. Mizuho, however, frames AI as a catalyst for RPM's supply chain modernization, aligning with its Outperform thesis.

The Fed's rate cuts further amplify this divide. UBS projects modest or negative growth for U.S. chemical production in 2025, whereas Mizuho sees the easing cycle as a tailwind for RPM's global footprint, particularly in Asia. This highlights a key debate: whether RPM's strategic initiatives can decouple its performance from sector-wide trends or if macroeconomic headwinds will persist.

Quantifying RPM's Outperformance Potential

In a Fed-cutting environment, RPM's Q4 2025 results suggest strong execution. The company's credit risk profile improved, with a default probability of 0.038 by year-end, and its debt reduction efforts under MAP 2025 have enhanced financial flexibility. Mizuho's $128 price target implies a 20.3% upside from its December 2025 closing price of $107.04, while UBS's $119 target reflects a more conservative 11.2% upside. The average analyst price target of $135.13 suggests a consensus for moderate outperformance, though institutional ownership trends remain mixed.

Conclusion: A Sector at a Crossroads

The contrasting ratings on RPM underscore the specialty chemicals sector's dual narrative: one of structural challenges and another of AI-driven transformation. UBS's Neutral stance reflects caution about global demand and trade policy risks, while Mizuho's Outperform rating bets on RPM's ability to leverage Asia's reforms and AI adoption. For investors, the key lies in assessing whether RPM's strategic initiatives-such as its MAP 2025 program and AI integration-can generate alpha in a Fed-easing world. As Asia's reforms and AI adoption gain momentum, the sector's long-term outlook may hinge on companies like RPM that balance operational agility with macroeconomic resilience.