Rheinmetall's Ruta 2 Cruise Missile Project Fails to Halt Share Slide Amid Execution Worries

Rheinmetall announces cruise missile joint venture with Destinus, but Q1 revenue miss and supply chain delays push stock to fresh 52-week low of €1,166.

Rheinmetall is doubling down on its strategic expansion with a new cruise missile joint venture, yet investors remain fixated on near-term execution hiccups that have sent the stock to a fresh 52-week low. The German defence group plans to build a long-range missile system known as Ruta 2, but the market's patience is wearing thin over supply chain delays and a first-quarter revenue miss.

The company has inked a deal with Dutch partner Destinus to establish a joint venture, with Rheinmetall holding a 51% stake. Production is slated to begin in the second half of 2026 at the group's Unterlüß facility, with CEO Armin Papperger aiming to cut the tape on the new manufacturing line before year-end. The Ruta 2 missile boasts a range of 700 kilometres and a payload capacity of 250 kilograms — a significant step into the long-range strike domain that Western armies are racing to rebuild.

But the announcement did little to arrest the stock's decline. On Monday, Rheinmetall shares touched a new yearly low of €1,171.80, and by the time the week's trading settled, the price had slipped further to €1,166.00. Since January, the DAX-listed stock has shed roughly 27% of its value.

The root cause lies in the first-quarter numbers that disappointed. Revenue came in at around €1.9bn, well short of the €2.3bn analysts had pencilled in. Management blamed delayed deliveries of military trucks and production setbacks at the Murcia ammunition plant in Spain. The order backlog, however, remains towering at €73bn, and operating profit rose 17% year-on-year — enough for some analysts to look past the miss, but not for everyone.

JPMorgan was the first to act. Analyst David Perry downgraded the stock to 'Hold' from a previous buy-equivalent rating and cut the price target to €1,500, citing growing execution risk from the sheer number of new partnerships Rheinmetall is pursuing. Its tie-up with Deutsche Telekom to develop a drone-defence system using 5G networks, unveiled this week at the AFCEA security fair in Bonn, is a case in point: the concept is novel — turning mobile network data into a radar-like detection tool — but sceptics question whether the group can juggle so many simultaneous ventures without stumbling.

Other houses remain firmly in the bull camp. Berenberg, Kepler Capital and Morgan Stanley all retain their buy recommendations, while UBS sticks with a price target of €2,200. The average analyst price target still implies upside of more than 25% from current levels.

Papperger is putting his money where his mouth is. The CEO has been buying shares on the recent dip, a signal of confidence that the second quarter should bring the delayed truck orders into the revenue line. On the strategic front, the cruise missile venture adds a new dimension to Rheinmetall's product range, positioning it as a key supplier of long-range strike capabilities that European militaries are urgently seeking.

The broader defence sector is experiencing a similar dichotomy — record order inflows coexisting with falling share prices, as investors penalise companies that fail to convert backlog into cash and profit quickly enough. Rheinmetall's current test is whether it can bridge that gap, turning its €73bn pipeline into visible margin and free cash flow delivery. The next catalyst comes on the AFCEA show floor this week, where the Telekom partnership will be demonstrated live. For now, though, the market wants results, not prototypes.