Why United Rentals Over Caterpillar: Navigating Cyclical Risks in Q1 2025

The construction and industrial sectors are rarely more intertwined with economic cycles than they are today. As investors prepare for the first-quarter 2025 earnings season, Caterpillar (NYSE: CAT) and United Rentals (NYSE: URI) stand at the center of a critical decision: which company offers better resilience in an environment of slowing growth and uncertain demand? While Caterpillar’s reputation as a bellwether for global infrastructure spending is well-established, United Rentals’ rental-focused model and less cyclical business dynamics make it a more compelling choice—especially ahead of their respective Q1 results.

The Case for United Rentals: A Rental Play in a Volatile Market

United Rentals’ business model revolves around equipment rentals, a segment that has historically outperformed capital-intensive manufacturing during economic soft patches. Unlike Caterpillar, which relies heavily on new equipment sales to construction, mining, and energy sectors, United Rentals generates recurring revenue from short-term rentals. This structure acts as a natural hedge against volatility, as companies in sectors like construction, agriculture, and utilities opt for rental flexibility rather than committing to costly purchases.

The data supports this advantage. shows URI outpacing CAT in consistent growth, with URI’s revenue rising by an average of 8% annually versus CAT’s 3%. Even in 2023, as global machinery sales slowed, URI’s rental portfolio grew by 9%, driven by demand for equipment in renewables and residential construction.

Analysts expect this momentum to continue in Q1 2025. project URI to report EPS of $8.92 and revenue of $3.61 billion, reflecting strong pricing power and utilization rates. This contrasts with Caterpillar’s likely softer results, as global mining and energy sectors face oversupply and declining capex.

Caterpillar’s Challenges: Navigating a Cyclical Downturn

Caterpillar’s exposure to cyclical industries has become a double-edged sword. The company’s Q1 earnings, set to be released on April 30, will likely reflect headwinds from multiple fronts:
1. Slowing Construction Activity: U.S. housing starts fell by 12% in Q1 2025, while non-residential construction spending stagnated amid high interest rates.
2. Global Mining Softness: Key markets like Australia and South America are cutting back on mining equipment purchases, with iron ore prices down 15% year-to-date.
3. Supply Chain Headaches: Caterpillar’s reliance on complex, globally sourced parts has left it vulnerable to disruptions, delaying deliveries and inflating costs.

These factors are reflected in Caterpillar’s stock performance. shows CAT lagging URI by nearly 10%, with its valuation now trading at a P/E ratio of 12—well below URI’s 19. This gap underscores investor skepticism about Caterpillar’s ability to navigate the downturn.

Q1 Earnings Preview: Timing and Transparency Matter

Investors should note that United Rentals’ April 23 earnings release date precedes Caterpillar’s by a week, giving URI’s stock more time to react to positive news. This timing advantage could amplify URI’s outperformance, especially if it exceeds EPS estimates or raises full-year guidance.

Caterpillar, meanwhile, faces the risk of a “sell the news” reaction if its results underwhelm. Even a modest miss on mining equipment orders or a rise in inventory could pressure its stock further.

Conclusion: The Rental Model Wins in a Slowing Economy

United Rentals’ focus on recurring rental revenue, paired with its industry-leading scale and geographic diversification, positions it as the safer pick in this environment. With analysts projecting URI to grow its EPS by 12% annually over the next three years versus CAT’s 5%, the case for URI is clear.

The data reinforces this view: URI’s operating margins (23%) are nearly double Caterpillar’s (12%), and its balance sheet—backed by $2.5 billion in liquidity—gives it flexibility to invest in high-margin opportunities like electric vehicle equipment. Caterpillar, by contrast, faces a 7% decline in machinery sales in Q1, per consensus estimates, as its legacy business model struggles to adapt to a post-pandemic economy.

For investors seeking stability and growth, United Rentals’ Q1 results will likely confirm its status as the sector’s premium play. Caterpillar, while still a powerhouse, remains too exposed to the vagaries of the global cycle to warrant the same confidence.

The chart tells the story: URI’s consistent ascent versus CAT’s volatility underscores why this is the right call for 2025.