From Kamikaze Drones to Kiel Shipyards: Rheinmetall’s Expansion Story Fails to Lift a Crushed Share Price

Rheinmetall's shares tumble 26% in a month after Q1 earnings miss, even as €73B backlog grows and the defense firm pushes into loitering munitions, anti-drone systems, and naval shipbuilding.

Rheinmetall is pushing into new frontiers — building its own loitering munitions, teaming up with Deutsche Telekom on an anti-drone shield, and bidding for a major Kiel shipyard — yet none of it has been enough to stop the stock from sliding to within a hair’s breadth of its 52-week low. On Friday, shares closed at €1,123.80, down 2.01% on the day and just €5.80 above the low of €1,118.00 touched on May 13. Over the past month, the equity has shed 25.88% of its value.

The catalyst for the sell-off was a first-quarter earnings miss. Revenue came in at €1.94 billion, roughly €300 million below analyst expectations. That disappointment wiped out much of the market’s goodwill, even as the company continues to rack up new business at a pace that outstrips its delivery capacity. The order backlog stood at €73 billion at the end of March, up from around €64 billion at the close of 2024. Management expects that figure to balloon to approximately €135 billion by the end of 2026, underpinned by the German government’s plans for a massive military budget hike.

Execution remains the bottleneck. Rheinmetall is winning more contracts than it can currently fulfil, and the tension between soaring demand and constrained output is keeping the share price under pressure. That dynamic has prompted analysts to take a cautious stance on the near term, even as most retain a bullish view over the longer horizon. The consensus price target sits at €2,011. Warburg Research analyst Christian Cohrs cut his fair value to €1,550 but upgraded the stock to Buy, arguing the correction had gone too far. Barclays also struck a supportive note, calling the broader defence sell-off overdone and reiterating an Overweight rating.

Drones: A new core battlefield

Rheinmetall is not waiting for the market to turn. In partnership with Deutsche Telekom, it is developing a protection shield for critical infrastructure that combines cybersecurity, sensor technology, secure networks, and countermeasures. The system is designed to detect drones early and neutralise them using jamming signals, interceptor drones, or lasers. Power plants, industrial sites, and bridges are among the target applications.

Separately, the group has started producing its own kamikaze drones — loitering munitions with a four-kilogram warhead and a flight time of more than an hour. Production is already running in Braunschweig and will eventually expand to Neuss. CEO Armin Papperger pointed to a fully European supply chain: the drone is assembled in Germany, and the warhead comes from Italy. Rheinmetall enters the field later than competitors Stark and Helsing, which have already secured German military contracts for similar systems.

Maritime ambitions gather pace

Rheinmetall is also doubling down on naval shipbuilding. After completing the acquisition of the marine division of Bremen’s Lürssen group at the end of February 2026, it has now submitted a non-binding offer for German Naval Yards in Kiel. The bid triggers a due diligence process, after which the company could table a binding proposal. A second interested party, TKMS, has also expressed interest, setting the stage for a bidding contest. The Kiel yard boasts critical infrastructure including a 426-metre dry dock. A decision is expected in the summer of 2026.

The newly created Naval Systems division is already contributing. In March, its first reporting month after the integration of several major North German shipyards — including the historic Blohm+Voss site — it added €77 million to group revenue, mainly from state shipbuilding programmes. Around 2,100 employees have moved into the unit.

First-quarter miss overshadows full-year guidance

Despite the operational expansion, the market’s immediate focus remains on the second quarter. Management promises a significant growth acceleration in the current period, driven by large marine and vehicle orders. In Murcia, munitions production is expected to return to full capacity following an explosion, while the Bundeswehr is set to accept completed trucks. The company’s full-year guidance remains intact: revenue of up to €14.5 billion and an operating margin of around 19%.

Shareholders did receive some comfort at the virtual annual general meeting in mid-May, where the dividend was raised to €11.50 per share. Yet with the stock down roughly 30% since the start of the year, the rally that bulls hoped for has so far failed to materialise. The technical picture is fragile. If the price breaks below the 52-week low of €1,118.00, further downside momentum could follow. The second-quarter numbers, due in the coming weeks, will need to deliver the promised boost to give the chart a much-needed lift.