Rheinmetall's Cruise Missile and Naval Offensive Fails to Lift Shares from 52-Week Trough

Rheinmetall proposes record €11.50 dividend and unveils cruise missile JV and naval expansion, but shares hit 52-week low amid cash flow woes and JPMorgan downgrade.

Investors were handed a generous dividend proposal and a raft of strategic expansion plans at Rheinmetall’s virtual annual general meeting on Tuesday — yet the stock still sank to a fresh 52-week low. The shares touched €1,155.60 during the session, pushing the year-to-date decline to almost 28%. The market’s scepticism overshadowed a proposed record payout of €11.50 per share, a jump of nearly 42% from the prior year, and a management team that is aggressively transforming the Düsseldorf-based group into a full-spectrum defence contractor.

Chief Executive Armin Papperger used the AGM to unveil a two-pronged growth push. On the land side, Rheinmetall will begin manufacturing cruise missiles at its Unterlüß facility in Lower Saxony before the end of the year, partnering with Dutch firm Destinus. The two companies plan to set up a joint venture called Rheinmetall Destinus Strike Systems in the second half of 2025, with Rheinmetall holding a 51% stake. The system will carry a 250-kilogram payload over a range of 700 kilometres and use artificial intelligence for target recognition. Simultaneously, the naval ambition is accelerating: the newly created Naval Systems division, anchored by the acquisition of Lürssen’s marine operations, starts life with an order backlog of €5.5 billion. Rheinmetall has also submitted a non-binding bid for German Naval Yards in Kiel, competing with Thyssenkrupp Marine Systems; due diligence is under way.

Despite the scope of these moves, the balance sheet is under strain. Heavy investment spending and lower customer advances pushed free cash flow deep into negative territory in the first quarter. Operating profit did rise 17% to €224 million, but that still fell short of analyst expectations. The cash crunch has not deterred the board from hiking the dividend, which will be put to a shareholder vote at the AGM alongside the proposed appointment of former US European Command chief Frederick Benjamin Hodges to the supervisory board.

JPMorgan responded by downgrading the stock to "Neutral" and cutting its price target to €1,500, citing execution risks tied to the expanding product portfolio. The shares now trade roughly 30% below their 200-day moving average. UBS, in contrast, sees the first-quarter revenue miss as a cleansing effect and maintains a "Buy" rating with a €2,200 target.

The company is sticking to its full-year guidance of up to €14.5 billion in revenue and an operating margin of 19%. Papperger expects a clear acceleration in both sales and order intake as soon as the second quarter. On Wednesday, the stock opened with a dividend-adjusted discount. To break the downtrend, the CEO will have to deliver that promised growth — and fast — in the coming months.