Investing.com -- Stifel struck a more cautious tone ahead of Home Depot’s third-quarter results, cutting its rating on the retailer to Hold from Buy as it flagged mounting pressure across the home-improvement sector.

In a preview of Home Depot (HD) and Lowe’s (LOW) fiscal third quarter, Stifel analyst W. Andrew Carter said he now expects the category to be “at best stagnant and potentially deteriorating ahead of difficult November/December comparisons.”

Carter added that while the longer-term drivers of the sector remain intact, “the near-term setup is too challenging to maintain our positive approach.”

Stifel explained that the downgrade reflects a weaker near-term outlook as it lowered its estimates for both chains.

“We have reduced our HD/LOW 2H25E/FY26E/FY27E to include a weaker 2H25 and a delayed home improvement category recovery,” the analyst wrote.

He added that they are now “meaningfully below consensus for both, and we do not believe buyside expectations appreciate the potential revision’s magnitude.”

For Home Depot specifically, Stifel said it expects the company’s third-quarter update to show a shortfall in same-store sales.

“We believe HD F3Q25 results/commentary will illuminate a weaker SRS performance relative to initial expectations,” the note said.

The firm warned that any shortfall is likely to intensify scrutiny of Home Depot’s efforts to grow its Complex Pro business, an area where the retailer “has spent $20 billion+ on M&A ahead of the December Investor Day.”