Evercore ISI upgraded the stocks of Toll Brothers and PulteGroup from "In-Line" to "Outperform" on Monday. Analyst Steven Kim stated in a report that homebuilders have faced challenging months and continue to grapple with rising mortgage rates and fluctuating consumer confidence. In this environment, the active adult and move-up buyer segments are performing more strongly.

"Consequently, PulteGroup and Toll Brothers have significantly higher operating margins than most peers and have seen much less deterioration relative to the fourth quarter of 2019," he wrote. "While awaiting a broader fundamental shift, we expect strength in the higher-end segment to remain more resilient, helping sustain earnings and cash flow for PulteGroup and Toll Brothers, especially on a relative basis."

Evercore ISI's $176 price target for Toll Brothers implies nearly 26% upside from Friday's closing price, while its $146 target for PulteGroup suggests 21% upside potential.

Kim also upgraded building materials company Masco from "In-Line" to "Outperform," citing its favorable price/cost positioning within the sector and minimal exposure to new home sales.