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

Rheinmetall shares climb despite Q1 revenue miss, as investors focus on unchanged 40-45% growth guidance and record €73bn order book.

The defence group’s first-quarter revenue missed analyst forecasts, but investors looked past the shortfall and pushed the stock higher. Rheinmetall reported sales of €1.938bn for the three months to March 2026, a 7.7% increase year-on-year but well short of the €2.3bn consensus estimate. The company blamed delivery delays at its Murcia facility in Spain and the handover of pre-produced trucks to a German customer, both of which have slipped into the second quarter.

The market’s reaction was telling. Shares climbed on 5 and 6 May to trade around €1,433, taking the seven-day gain to more than 7%. The optimism rests squarely on management’s unchanged full-year guidance: revenue growth of 40% to 45% and an operating margin of roughly 19%. That implies a dramatic acceleration from the second quarter onwards — and the delayed deliveries are supposed to provide the catalyst.

Profitability told a more encouraging story. Operating profit rose 17% to €224m, lifting the operating margin to 11.6% from 10.5% a year earlier. The company is making increasingly efficient use of its expanded production capacity, particularly in ammunition. CEO Armin Papperger highlighted that Rheinmetall now produces 1.1m artillery shells annually — nearly double the 600,000 units the US manufactured in 2024. For medium-calibre ammunition, capacity has surged from 0.8m to more than 4m units per year.

Less reassuring was the cash position. Operating free cash flow came in at minus €285m, while analysts had expected an inflow of around €181m. Rheinmetall attributed the drain to rising capital expenditure, working capital build-up and low customer advance payments. For the full year, however, it still expects a cash conversion rate above 40%.

The company’s order book provides a powerful buffer. It reached a record €73bn at the end of the quarter, up 31% year-on-year, with order intake of €4.9bn in the first three months alone. A new framework agreement with the German armed forces worth €300m for loitering munition added to the momentum. Rheinmetall has also expressed interest in the insolvent Romanian shipyard ?antierul Naval Mangalia, aiming to establish Romania as a European hub for military and civilian shipbuilding.

Several analysts see significant upside. Goldman Sachs has a €2,300 price target with a Buy rating, Jefferies sits at €2,220, DZ Bank at €2,188, Deutsche Bank at €2,100 and Bernstein at €2,050. The current share price of €1,433.80 is roughly 28% below the 52-week high of €1,995. The relative strength index of 76 signals short-term overbought conditions, which could temper the recent rally.

Structural tailwinds are building. Germany’s state fund Kenfo has lifted its restrictions on defence investments, opening the door for ESG-linked capital that previously shunned the sector. Berlin’s planned increase of the defence budget to €150bn provides a further long-term underpinning for the industry. Whether Rheinmetall can deliver the promised second-quarter catch-up will be the first concrete test of its ambitious annual targets.