Rheinmetall’s Long-Range Rocket Pact and Analyst Backing Face Off Against Earnings Reality

Rheinmetall rises 4.5% after Citigroup upgrades to Buy and unveils a cruise missile joint venture, but a Q1 earnings miss and overbought signals test the rebound.

Rheinmetall has emerged from a bruising start to the week with two distinct catalysts that, together, test whether the defence group can shake off a steep earnings-driven selloff. The stock climbed more than 4.5% on Monday, closing near €1,175.20, after Citigroup upgraded the shares to “Buy” and the company unveiled a joint venture to mass-produce a cruise missile with a range of 2,000 kilometres. Yet the rally unfolds against a backdrop of a 26.5% year-to-date decline and a first-quarter profit that badly missed forecasts.

The fresh production programme, named RUTA Block 3, brings together Rheinmetall and Dutch firm Destinus in a 51/49 joint venture called Rheinmetall Destinus Strike Systems. The missile, powered by a T220 turbojet engine and carrying a 250-kilogram warhead, will be assembled at Unterlüß in Germany, with design work concentrated in the Netherlands and component testing in Ukraine. The partners expect the first units to roll off the line by the end of 2026 and estimate the annual market at several billion euros.

Citi analyst Charles Armitage upgraded the stock from “Neutral” the same day, setting a price target of €1,408. His reasoning: the roughly 45% drop from last year’s all-time high of €1,995 is overdone. Even if active hostilities in Ukraine eventually subside, Russia remains a lasting threat to Europe, and countries such as Germany and Sweden can still expand their borrowing for defence spending—providing structural tailwinds for the entire sector.

The share’s recovery remains tentative. At current levels, the stock trades about 41% below its 52-week peak, and the relative-strength index of 93 signals short-term overbought conditions. The immediate test is whether Rheinmetall can hold above the €1,100 mark; a sustained break there would suggest the downtrend of recent weeks has snapped.

That backdrop makes the first-quarter earnings miss all the more acute. Revenue rose 8% to €1.94 billion and the operating margin improved to 11.6%, but earnings per share of €2.18 fell well short of the €2.70 consensus. Management blamed timing shifts in deliveries, an explosion at a Spanish munitions factory, delayed truck shipments, and tough prior-year comparables. Though the company reiterated its full-year guidance—revenue between €14.0 billion and €14.5 billion, and an operating margin of roughly 19%—the market had little patience for operational hiccups after years of relentless gains.

Barclays, like Citi, remains bullish. The investment bank counts Rheinmetall among its top picks in European defence, arguing the order book is the real story. It surged 32% year on year to €73 billion, meaning the group is still winning far more business than it can execute in the short term. That structural backlog, combined with Rheinmetall’s strong positions in ammunition and military vehicles, underpins the positive view. The average analyst price target stands at €1,972, with 17 buy ratings, though Berenberg has cut its target to €1,750 and JPMorgan downgraded the stock to “Neutral” with a €1,500 target.

Inside the boardroom, confidence is being backed with cash. CEO Armin Papperger bought shares worth more than €500,000, pushing total insider purchases over the past 90 days to roughly €1.32 million, with no recorded sales. The next proving ground is the second quarter: if Rheinmetall can catch up on delayed deliveries and confirm its margin pathway, the upgrade thesis gains credibility. If not, the deep discount to peak valuations—and to ambitious price targets—will likely persist.