Rheinmetall Juggles Boxer Order Delay and a New State-Backed Rival in KNDS

Rheinmetall's shares slump on Q1 earnings miss, Boxer contract delays, and a state-backed rival KNDS preparing to go public, despite record backlog and revenue growth.

Rheinmetall’s record order backlog and surging revenue tell one story, but the share price tells another. The Düsseldorf-based defence group has seen its stock slump nearly 40% from last autumn’s all-time high, even as it reaffirms ambitious full-year targets. Two distinct headwinds now shape the narrative: the long-awaited €23 billion Boxer armoured vehicle contract continues to slip, and a government-backed competitor is preparing to go public.

Q1 Misses Expectations as Analysts Trim Targets

The first-quarter numbers, released in recent weeks, fell short of market forecasts. Revenue reached €1.94 billion, well below the consensus estimate of around €2.3 billion. Net profit came in at €111 million, while operating profit stood at €224 million and earnings per share climbed to €2.42 from €1.92 a year earlier. The miss was partly attributable to project accounting delays that pushed some revenue recognition into later quarters, masking the underlying operational momentum.

The market response was swift. UBS cut its price target from €2,200 to €1,600 but kept a “Buy” rating, arguing that the current share price already discounts no further growth in ammunition sales beyond 2026 and has priced in the Boxer programme. JPMorgan went further, slashing its target from €2,130 to €1,500. Despite the cuts, the average analyst target still stands at around €2,097, implying significant upside from the current level of roughly €1,211.

Arminius Stalls Again

The biggest catalyst on the horizon is the “Arminius” project, under which the German military plans to procure thousands of Boxer wheeled armoured vehicles. Rheinmetall CEO Armin Papperger now expects a contract signing in the second half of the year, a delay from the earlier spring timeline. The holdup is administrative: it remains unclear whether the European agency OCCAR or Germany’s own procurement office will sign the deal.

Berenberg analysts estimate the order could cover 3,000 vehicles worth €23 billion, though they have slightly reduced their volume forecast. The bank notes that 62% of planned 2027 revenue is already secured by firm orders, providing a solid base even if the mega-deal takes longer to materialise.

KNDS IPO Looms as State Steps In

Adding to investor unease is the emergence of a direct rival with deep government ties. Berlin has agreed to take a 40% stake in KNDS, the Franco-German manufacturer of the Leopard 2 tank and Panzerhaubitze 2000. France will hold the same percentage, giving both nations equal voting rights in a company valued at €18 billion to €20 billion.

An initial public offering of KNDS is slated for June or July 2026. Over time, each government plans to reduce its holding to 30%, but in the near term Rheinmetall will face a well-capitalised, state-backed competitor listed on the stock exchange. The threat is structural rather than immediate, but it has weighed on sentiment.

Diversification Moves: Satellites and Trucks

Away from the crowded land-systems market, Rheinmetall is pushing into new territory. Together with space firm OHB, it is building a military satellite network for the German armed forces — a project in low Earth orbit valued at €8 billion to €10 billion. The joint venture received antitrust approval in April.

On the acquisition front, Rheinmetall is reportedly eyeing Iveco’s defence division (IDV), which is being carved out for sale while the parent company negotiates with India’s Tata Group. Other potential buyers include Leonardo, KNDS and CSG. A successful purchase would broaden the product portfolio, though it would come at a time when the Bundesbank forecasts a stagnant German economy in the second quarter of 2026, weighed down by the Iran conflict and rising energy prices.

Chart Speaks, But Backlog Provides Anchor

Technically, the picture is bleak. The stock has lost over 24% since the start of the year and more than 32% over twelve months. The gap to the 200-day moving average exceeds 26%, confirming a downtrend across all time frames.

Nevertheless, the company’s guidance remains intact. Management expects full-year revenue growth of up to 45% to €14.5 billion, with an operating margin of roughly 19%. The order backlog should swell to around €135 billion by December. For 2026, analysts project a dividend of €15.17 per share — a concrete floor for investors weighing the near-term noise against the longer-term promise of Europe’s rearmament drive. The second half of the year will determine whether the missing mega-deals can finally close the gap between operational reality and the stock’s depressed valuation.