Rheinmetall's €73 Billion Backlog Can't Shield It From Q1 Disappointment and New Industry Rivals

Despite record €73 billion order backlog, Rheinmetall shares tumble 24% in 2026 after Q1 earnings miss. Analyst downgrades and auto industry competition add pressure.

The defence group Rheinmetall is sitting on a record order book of €73 billion, yet the market tone around the stock has turned distinctly sour. A first-quarter earnings miss, a wave of analyst price target cuts, and the spectre of competition from deep-pocketed automotive giants are all weighing on a share price that has already tumbled nearly a quarter since January.

Execution stumbles as revenue and profit fall short

On 7 May the company reported Q1 revenue of €1.94 billion, up 8% year-on-year, and operating profit of €224 million — a 17% rise but well below the €240 million consensus estimate. Earnings per share came in at €2.18 versus the €2.71 analysts had pencilled in. Management nonetheless reaffirmed its full-year guidance, pointing to a stronger second quarter for both sales and order intake.

The market has not been forgiving. The stock closed at €1,221.40 on Friday, roughly 39% below its 52-week high of €1,995 struck last September. Since the start of 2026 the shares have lost around 24% of their value, a performance that stands in sharp contrast to domestic rival Hensoldt, which has eked out modest gains over the same stretch. Analysts attribute Hensoldt's relative resilience to its more defensive positioning within the defence ecosystem.

Analyst whiplash: cuts and a lonely upgrade

Several investment banks reacted to the quarterly disappointment by slashing their price objectives. UBS delivered the harshest blow, cutting its target from €2,200 to €1,600 while retaining a buy rating. Jefferies followed suit, trimming its target to €1,890 from €2,220, also keeping a "Buy" call. Barclays stood pat at €2,035 with an "Overweight" stance.

One institution bucked the trend. Citigroup upgraded Rheinmetall from "Neutral" to "Buy", arguing that the market's pessimism has been overdone. The bank set a price target of €1,408, citing the record order backlog as a source of fundamental support.

On the charts, the stock faces stiff resistance around the €1,240 level, having failed to break through it several times in recent sessions. The relative strength index sits at 85.6 — territory that signals overbought conditions after the bounce from the May low of €1,118. That technical picture suggests any further near-term rally may be capped unless fresh catalysts emerge.

Automakers muscle into the defence arena

A structural shift in the defence industry adds another layer of uncertainty. Major car manufacturers — Mercedes-Benz, Volkswagen and BMW — are increasingly turning their production capacity toward military vehicles. Mercedes is already supplying trucks to the German armed forces, while KNDS is exploring the use of automotive factories for armoured vehicle assembly. The entry of these cash-rich industrial players poses a long-term threat to the market share of established defence contractors like Rheinmetall.

Macroeconomic headwinds are also mounting. The energy price crisis triggered by the ongoing Iran conflict is squeezing German industry, creating a more challenging backdrop for equipment procurement and investment.

Potential M&A and a busy calendar ahead

Rheinmetall may be eyeing a strategic acquisition to strengthen its position in armoured vehicles. The company is reported to be among the bidders for Iveco Defence Vehicles, the military vehicle unit of Iveco that is not included in the planned sale to India's Tata Group. A deal would complement Rheinmetall's existing portfolio and could provide a growth narrative beyond the current order backlog.

Investors will now focus on the second quarter to see whether management can deliver on its growth promises. Geopolitical events in the coming weeks — including a conference on Ukraine reconstruction in Magdeburg on 28 May and the Ostdeutsche Wirtschaftsforum starting 31 May — could inject fresh headlines into the defence sector. Until then, the €1,200 support level remains the key line in the sand for the stock.