Rheinmetall’s Q1 Test: Can Record Orders Finally Translate into Profit?

Rheinmetall's order backlog surges 36% to €135bn, but shares slide 15% in 2025. Investors await Q1 results on May 7 for margin proof amid a €40bn Bundeswehr prize.

The disconnect is stark. Rheinmetall’s order book is bulging, yet its share price is languishing near a 12-month low. At Friday’s close of €1,357.80, the stock has shed roughly 15% since the start of the year, a slide that looks puzzling given the torrent of new business.

Just last week alone, the defence group locked in contracts worth €5bn. Its total order backlog has swelled 36% year-on-year and is on track to hit around €135bn by year-end. But the market is demanding proof that this pipeline will actually fatten the bottom line.

Margins Under the Microscope

All eyes are now on 7 May, when Rheinmetall releases its first-quarter results. Investors want hard evidence that the surge in orders is feeding through to profitability. The stakes are high: management has set a target of roughly 19% for the full-year operating margin, alongside revenue growth of more than 40%.

A look back explains the current nervousness. The 2025 full-year numbers missed expectations on free cash flow, and revenue fell short of the roughly €15bn analysts had pencilled in. The lesson is clear: a fat order book does not guarantee near-term profit leaps.

The Q1 report will also debut a new divisional structure. From January, Rheinmetall has reorganised into segments including Air Defence and Naval Systems, offering investors a clearer view of where profits are being generated.

A Fatter Dividend and a Croatian Bet

Five days after the numbers, on 12 May, shareholders gather for a virtual annual meeting. They are in line for a significantly bigger payout. The board is proposing a dividend of €11.50 per share, up sharply from the €8.10 distributed for the prior year. To qualify, investors must hold the stock on the day of the meeting.

Meanwhile, Rheinmetall is pressing ahead with portfolio expansion. It has acquired a 51% stake in DOK-ING, a Croatian specialist in unmanned military vehicles. The partnership will make Croatia a hub for autonomous systems and includes plans for a support vehicle dubbed “Wingman”. The purchase price has not been disclosed, and the deal still requires regulatory approval.

The €40bn Prize

The biggest catalyst, however, remains out of reach for now. The Bundeswehr’s “Arminius” programme is expected to involve more than 3,000 additional wheeled armoured vehicles. Rheinmetall’s CEO has estimated the total value at up to €40bn. Market observers do not expect a final contract until mid-2026.

Analysts See Value Despite the Weakness

Despite the stock’s technical woes — it currently trades below both its 50-day and 200-day moving averages, signalling medium-term selling pressure — the fundamental view is far more upbeat. A consensus of 21 analysts leans heavily towards buy recommendations, with not a single sell call in sight. The average price target stands at €2,051, implying significant upside from current levels.

The Q1 report on 7 May will be the moment of truth. If Rheinmetall can deliver stable margins and solid cash flow, it could ease the selling pressure and start closing the gap between its operational reality and its stock market valuation. Disappoint, and the recent lows around €1,330 could be tested once more.