Rheinmetall's Dual-Pronged Advance Faces a Skeptical Market

Rheinmetall secures a €2.4B defense contract and US market access, yet its stock price struggles despite strong order book and rising dividend.

While its share price struggles, Rheinmetall AG is advancing on multiple strategic fronts, securing major defense contracts and crucial regulatory approvals. The German defense group's operational momentum stands in stark contrast to its recent stock performance, creating a notable disconnect for investors.

A significant boost comes from a new multi-billion euro framework contract with the Bundeswehr. The German parliament's budget committee has greenlit the deal for the FV-014 Raider loitering munition system, with a total volume of 2.4 billion euros. An initial tranche of nearly 300 million euros is firmly committed. Rheinmetall is set to deliver the first units this year, with plans to supply over 100 operational sets to the armed forces by 2028, specifically strengthening the NATO eastern flank's Lithuania brigade.

However, a leaked document reported by Berliner Zeitung reveals potential technical challenges with the prestigious Raider project. Insiders cite gaps in integration with the unmanned weapons command system and note that the launch is noisy and visually conspicuous, which could reduce its tactical value. The contract terms have also raised eyebrows, as Rheinmetall reportedly has until the end of April 2027 to provide qualification proofs—a timeline more generous than those given to startup rivals Stark and Helsing. The company is also said to receive ten times the development funds for its prototype compared to competitors.

Simultaneously, Rheinmetall's US subsidiary, American Rheinmetall, has cleared a critical hurdle for accessing the lucrative American defense market. All six of its US manufacturing sites have now achieved CMMC Level 2 certification, having implemented 110 specific cybersecurity controls. This certification is a mandatory prerequisite for new US Department of Defense tenders, effectively unlocking a historically difficult market for European defense firms.

The company's naval division is also accelerating its pace. At the Peene-Werft in Wolgast, the keel-laying ceremony for the third Class 424 fleet service boat was held in mid-April, ahead of schedule. These 130-meter-long ships will be used by the Bundeswehr for sea-based information gathering.

Financially, the company's order book appears robust. Management forecasts group sales of up to 14.5 billion euros for the current year, with the operating margin expected to climb to around 19 percent. A substantial 91 percent of the targeted sales are already covered by firm orders. Shareholders will vote on a proposed dividend of 11.50 euros per share at the Annual General Meeting on May 12, representing a sharp 42 percent increase.

Despite these operational and strategic gains, Rheinmetall's stock has failed to respond. Shares closed at 1,502.20 euros on Friday, marking a year-to-date loss of over six percent and trading nearly 25 percent below its record high. The stock remains technically weak, sitting about eleven percent below its 200-day moving average, with shorter-term trend lines also out of reach.

The company will remain in the spotlight in the coming weeks, presenting at the Hannover Messe from April 20 with a focus on AI and autonomous systems, before reporting first-quarter figures on May 7.