Rheinmetall’s Factory Floor Is Humming, but the Share Price Is Stuck in the Mud

Rheinmetall's shares hit a one-year low even as a €3.3 billion Romanian tank deal and €2.4 billion Bundeswehr order boost its backlog to nearly €64 billion.

The disconnect between Rheinmetall’s booming order book and its flagging stock price has rarely been starker. While the defence contractor’s production lines are running at full tilt and new contracts keep piling in, the shares are trading at their lowest level in a year. The stock closed at €1,339.80 on Tuesday, marking a decline of more than 16% since the start of 2025 and leaving it a full 20% below its 200-day moving average.

A modest bounce on Wednesday — with the stock edging up around 1.5% to roughly €1,360 — was triggered by a note from JPMorgan. Analyst David Perry argued that the recent sell-off had created a buying opportunity, pointing to an expected 21% increase in Germany’s defence budget as a catalyst. Yet the broader mood remains cautious, with investors seemingly more focused on the costs of the company’s rapid expansion than on its revenue growth.

A €3.3 Billion Romanian Prize

The clearest sign of demand comes from Eastern Europe. Romania is preparing to replace its ageing fleet of infantry fighting vehicles, and Rheinmetall is widely reported to be the lead contractor for the procurement programme. Bucharest plans to buy nearly 300 Lynx tanks in a deal valued at around €3.3 billion, with financing expected to come from the EU’s SAFE defence credit programme. The formal award is anticipated by the end of May.

The Romanian package goes well beyond armoured vehicles. It also includes air defence systems such as Skynex and Skyranger, as well as ammunition and patrol vessels. That breadth diversifies Rheinmetall’s revenue base beyond its traditional land systems business, giving it a wider footprint across multiple defence domains.

New Frontiers on Water and in the Air

The company is also pushing into new segments. At its Blohm+Voss facility in Hamburg, Rheinmetall has started series production of the Kraken K3 Scout, an unmanned surface vessel. The joint venture with a British partner has been renamed Rheinmetall Kraken GmbH, and initial capacity stands at 200 boats per year, with the potential to scale up to 1,000 units if demand warrants.

Separately, Rheinmetall is building a presence in missile systems. A joint venture with Destinus is in the works and is expected to launch in the second half of the year. These moves reflect a deliberate strategy to reduce reliance on any single product line and tap into adjacent markets where defence spending is also rising.

The Bundeswehr’s Loitering Munitions Order

Closer to home, the German armed forces have signed a framework agreement with Rheinmetall for loitering munitions. The deal has a total potential value of up to €2.4 billion, with an initial call-off worth around €300 million already secured. It adds to a backlog that stood at nearly €64 billion at the last count, providing exceptional visibility into future revenues.

For the current financial year, management is targeting sales of up to €14.5 billion — a jump of more than 40% from the €10 billion posted in the previous year. Crucially, over 90% of those projected revenues are already backed by existing orders.

Why the Market Isn’t Cheering

So why is the stock languishing? The answer lies in the cost of growth. Rheinmetall is ramping up truck production aggressively and stockpiling critical components to avoid supply bottlenecks. The value of those inventories has ballooned to around €8 billion, tying up enormous amounts of cash. As a result, free cash flow is under pressure, and the operating margin the company has flagged — roughly 19% — falls slightly short of analyst expectations.

The next major test comes on 7 May, when Rheinmetall reports first-quarter results. Investors will be watching closely for any signs that profitability or cash conversion is improving. A positive surprise on either front, or the formal confirmation of the Romanian contract, could provide the spark the stock badly needs. The annual general meeting follows shortly after, where a dividend of €15.40 per share is expected to be put to a vote.