Rheinmetall Faces a Defining Quarter as Investors Weigh Recovery Against a Backlog in Motion

Rheinmetall shares rebound 8% from year low but remain 18% down in May; Q1 revenue miss and cash flow drag raise stakes for Q2 catch-up as analysts average target €2,097.

Rheinmetall’s stock has clawed back eight percent over the past week, closing at €1,240 on Wednesday, but the defence group remains a long way from the near-€2,000 peak it touched last September. The bounce from the year’s low — €1,118 versus the earlier reported trough of €1,099.80 on 13 May — has been enough to lift the relative strength index to nearly 88, signalling strong short-term momentum. Yet the share is still down roughly 18 percent month-to-date and 21.59 percent since January, leaving analysts and investors asking whether the second quarter can deliver the proof of execution that the first one failed to provide.

The opening three months of 2026 were a mixed bag. Revenue reached €1.94 billion, an eight percent increase year-on-year, but fell well short of the €2.3 billion the market had anticipated. A bottleneck in military-truck deliveries, a munitions-related delay and a production accident at the company’s Spanish Murcia site all constrained the top line. Operating profit rose to €224 million from €191 million, and the margin improved, but the operating free cash flow turned deeply negative at minus €285 million. Management attributed the cash drain to upfront spending, including roughly €200 million on truck chassis and about €100 million on propellant powder.

Rheinmetall nevertheless reaffirmed its full-year guidance: revenue of €14 billion to €14.5 billion, supported by an expected margin improvement. The slack in Q1 has been pushed into the current quarter, and the market is now fixated on seeing a visible catch-up effect in the three months through June. Bernstein, which cut its price target to €1,900 from €2,050, sees Q2 as a clear stress test and forecasts a roughly 60 percent revenue jump year-on-year. UBS is more bullish at €2,200, while Citigroup points to an average 12.3 percent annual growth in Germany’s procurement budget over the coming decade.

Barclays, sticking with an “Overweight” rating and a €2,035 target, expects earnings to surge 45 percent this year — more than double the sector average of 19 percent. To fund that expansion, Rheinmetall recently launched its first public unsecured bond since 2010, a €500 million placement that should provide additional financial flexibility. The move comes as the broader defence sector enjoys a tailwind from the planned government entry into tank maker KNDS.

The longer-term catalyst remains the massive Boxer-Arminius vehicle programme. The German military is preparing to acquire up to 3,000 armoured vehicles, a package valued at around €40 billion. Rheinmetall’s chief executive, Armin Papperger, now expects a contract to be signed no earlier than the second half of 2025 — a delay that has already led Berenberg to trim its assumed contract value to €23 billion from €32 billion. While the postponement tempers near-term expectations, it does not diminish the strategic heft of the order.

The average analyst price target stands at €2,097.22, roughly 70 percent above the current share price. That kind of upside assumes Rheinmetall can convert its record order book — €73 billion at the end of last year — into cash and earnings. The next concrete checkpoint comes with Q2 results, when the company must show that deferred revenues are arriving and that the margin trajectory remains intact. If the catch-up works as planned, the stock’s recent recovery could prove to be more than just a technical rebound.