S&P/ASX 200 Index (ASX: XJO) stock Reliance Worldwide Corp Ltd (ASX: RWC) hasn't had the best start to 2025.
In afternoon trade today, shares in the global plumbing and heating products company are down 0.2%, changing hands for $4.08 apiece.
That sees the Reliance Worldwide share price down 19.5% year to date and down 18.2% since this time last year. Though that doesn't include the 7.8 cents a share in unfranked dividends the company has paid out over the past year.
At the current share price, the ASX 200 stock trades on a 1.9% trailing dividend yield.
But the year ahead could be much more profitable for shareholders.
That's according to the latest research report from Macquarie Group Ltd (ASX: MQG), released earlier today.
Here's why the broker is bullish on the company.
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ASX 200 stock priced for 'worst case scenario'
On Monday, Reliance Worldwide provided an update on the impacts on its business from United States President Donald Trump's global tariff campaign.
The ASX 200 stock said it is "working actively to mitigate the impact of recently introduced US tariffs on imports into the US".
The company noted that it has a significant manufacturing presence in the US. Yet around 48% of the Americas region's cost of goods sold are sourced outside the US. That makes them a potential tariff target.
Those imported goods include raw materials and components as well as finished goods.
Management said they are cutting costs where possible and increasing prices in the US to ease the Trump tariff pain. The ASX 200 stock also noted it is switching product sourcing from China to other countries "given the high level of tariffs now applying to China-sourced product".
But management still expects the Trump tariffs to take a bite out of earnings.
The company stated:
As a result of the actions being undertaken to mitigate US tariffs, RWC expects that the net cost impact of tariffs on FY26 operating earnings (EBITDA) will be in the range of US$25 million to US$35 million.
This cost estimate is based on current tariff rates in place today which include a 145% incremental rate on Chinese imports, 10% reciprocal tariffs and 25% for steel and aluminium imports. Changes to these rates will impact this estimate.
In maintaining its outperform rating on the ASX 200 stock, Macquarie said, "It is important to note that RWC has factored in current tariff settings, which, given increasing suggestions of a deal with China, should be factoring in a worst-case scenario."
The broker concluded:
The macro backdrop remains soft, with the prospect of a recovery moving to the right, but valuation remains in support of our investment thesis. RWC trades at a ~20% discount to its 5-yr average EV/ EBIT.
Trade risks remain, but RWC has shown strong progress in managing impacts.
Macquarie has a 12-month target price of $5.55 on the ASX 200 stock. That represents a potential upside of 36.0% from current levels. And this doesn't include the upcoming dividends.
