Investing.com -- Evercore adjusted its 2026 home improvement category growth estimate to 2% from 1%, citing stronger first-half performance rather than an improved outlook for the sector.

The firm's Home Improvement Lead Indicator declined 18 basis points month-over-month to 2.8% in June, marking the fifth consecutive reading near 3%. The decrease came from weaker consumer sentiment comparisons and a narrowing mortgage rate tailwind, which offset gains from better home prices and project-related spending.

First-half 2026 Census category sales reached 3.9%, exceeding the path implied in Evercore's previous 1% estimate. The firm kept its second-half outlook unchanged, which mechanically produces approximately 2% growth for the full year.

The composition of the first-half growth prompted caution from Evercore. The upside came from average unit retail, tariff pass-through, and price increases rather than unit volume. First-quarter traffic was negative at Home Depot (NYSE: HD), Lowe's (NYSE: LOW), and Floor & Decor (NYSE: FND), while ticket size drove comparable sales at each retailer.

Evercore noted that nominal dollar figures are running ahead of underlying demand. The firm said the category continues to produce nominal growth largely funded by price increases, which supports a modestly better second half but falls short of the inflection point needed for a bullish outlook.

Among stocks, Evercore favors Sherwin-Williams (NYSE: SHW) and Home Depot. The firm said Sherwin-Williams' pricing actions in the second half will help offset softer industry-wide volumes, while Home Depot represents the cleaner option for exposure to a professional customer recovery. In home furnishings, Wayfair remains the firm's higher-beta home-spend exposure.