Rheinmetall heads into its annual general meeting on Tuesday with a compelling growth story — a record €73bn order book, a new drone-defence partnership with Deutsche Telekom, and a proposed 42% dividend increase. Yet the market is looking the other way. The German defence group’s shares closed at €1,207.20 on Friday, extending a weekly decline of 11.9%, and have now fallen more than 24% since the start of the year. The distance from the 52-week high has widened to over 41%.
The crux of the investor unease lies in the tension between operational momentum and short-term financial strain. First-quarter revenue rose 8% to €1.94bn, while operating profit jumped 17% to €224m, pushing the operating margin to 11.6%. Adjusted earnings per share improved from €1.78 to €2.18. But the headline cashflow numbers tell a harsher story: free cashflow swung to minus €285m, worse than the €243m deficit a year earlier, as the company built up inventories and working capital to meet expected demand from European and NATO customers.
That cashflow drain is the main reason analysts remain split. Deutsche Bank sticks with a “Buy” rating and a €2,100 target, pointing to the long-term revenue visibility from the enormous order pipeline. JPMorgan is more cautious, having downgraded the stock to “Neutral” with a €1,500 price objective, arguing that Rheinmetall has struggled to consistently meet market expectations. Technically, the stock is trading well below its 50-day moving average of €1,500.51 and its 200-day average of €1,665.95, underscoring the bearish sentiment.
Should investors sell immediately? Or is it worth buying Rheinmetall?
Against that backdrop, Monday’s announcement of a collaboration with Deutsche Telekom aimed at protecting critical infrastructure — KRITIS — was a strategic reminder of the company’s broadening ambition. The partnership will combine Telekom’s network expertise and passive radio-frequency sensors with Rheinmetall’s drone-detection sensors, interception drones, and laser technology. The system is designed to spot drones early and neutralise them through jamming or physical countermeasures, without resorting to anti-aircraft guns. It marks a clear push into civilian security markets alongside the traditional military business.
CEO Armin Papperger has been steadily transforming Rheinmetall into a full-spectrum defence and security supplier, adding naval systems via the acquisition of Naval Vessels Lürssen (which contributed roughly €5.5bn to the order book), cruise missiles, and now digital drone defence. The order backlog reached a record €73bn at the end of the first quarter, bolstered by the marine segment. Management reaffirmed its 2026 targets of €14bn–€14.5bn in revenue and an operating margin of around 19%.
Tuesday’s annual meeting will see management propose a dividend of €11.50 per share, up from €8.10 last year — a gesture of confidence in the long-term earnings trajectory. Yet for the stock to regain its footing, the board will need to convince investors that the cashflow squeeze is a temporary by-product of capacity expansion, not a structural drag. The gap between Papperger’s vision and the market’s current patience has rarely been wider.
Ad
Rheinmetall Stock: Buy or Sell?! New Rheinmetall Analysis from May 11 delivers the answer:
The latest Rheinmetall figures speak for themselves: Urgent action needed for Rheinmetall investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from May 11.
Rheinmetall: Buy or sell? Read more here...
