Rheinmetall’s €73bn Order Book Offers Cover for a Wobbly Quarter

Rheinmetall shares rise 4.5% despite Q1 revenue miss as record €73bn order backlog and steady margins offset cash flow concerns, with full-year guidance reaffirmed.

The Düsseldorf-based defence contractor has delivered a first-quarter performance that on the surface looks like a miss, yet investors have chosen to look past the revenue shortfall and focus on the bigger picture. Rheinmetall’s shares climbed more than 4% on Tuesday as the market digested preliminary results that showed a record order backlog but a disappointing top line.

Revenue for the three months to March came in at roughly €1.94bn, falling well short of the €2.3bn analysts had pencilled in. That represented growth of just 7.7% year-on-year — a modest pace for a company accustomed to double-digit expansion. The shortfall, management explained, was a matter of timing rather than demand. Pre-produced trucks destined for a German customer, along with ammunition from the new Spanish facility in Murcia, will only change hands in the second quarter.

The profit picture offered more comfort. Operating profit rose to €224m, pushing the corresponding margin to 11.6%, precisely in line with market expectations. That margin performance suggests the underlying business remains on solid footing, even if revenue recognition has been pushed back.

A Cash Drain That Raises Eyebrows

The real sore spot lies in the cash flow statement. Free cash flow before acquisitions swung to negative €285m, weighed down by rising investment spending and working capital build-up. Customer advance payments, meanwhile, came in lower than anticipated. It is a familiar pattern for a company scaling up production capacity, but one that will need to reverse if Rheinmetall is to hit its full-year targets.

The group is standing by its 2026 guidance, which calls for revenue of between €14.0bn and €14.5bn and an operating margin of around 19%. Management has flagged a sharp acceleration in deliveries during the second quarter, a promise the market will be watching closely.

The €73bn Backlog That Changes Everything

What has really captured the attention of analysts and investors alike is the order book. Rheinmetall’s backlog has swelled to a record €73bn, up from €56bn a year earlier. A single nomination worth nearly €5bn contributed to the jump, alongside a change in reporting structure that now includes the Air Defence and Naval Systems divisions directly in the calculation.

AlphaValue, the independent research house, notes that the structural defence theme remains intact but cautions that Rheinmetall must now demonstrate it can work through this mountain of orders efficiently. Jefferies, DZ Bank and Barclays have all reiterated their buy ratings, with price targets ranging from €2,125 to €2,220. The DZ Bank recently lifted its target to €2,188.

Share Price Recovery Ahead of the AGM

The stock added 4.55% on Tuesday to close at €1,432.40, pulling away from the 52-week low of €1,337.60 touched in late April. The year-to-date performance remains negative by roughly 10%, but the latest session suggests the worst may be behind it.

Full quarterly results are due on 7 May, when Rheinmetall will provide detailed figures on net profit and working capital movements. The virtual annual general meeting follows on 12 May, where shareholders will vote on a proposed dividend of €11.50 per share — a 42% increase from the prior year’s payout.

For now, the market appears willing to give management the benefit of the doubt. The order book provides ample cover, but the clock is ticking on delivery.