Rheinmetall’s Shipbuilding Bet Faces a Market That Wants Results, Not Ambition

Rheinmetall shares hit 52-week low after Q1 revenue miss of €362M; CEO pursues Kiel shipyard bid as order backlog swells to €73B.

The Düsseldorf-based defence giant is entering one of its most consequential weeks in recent memory. On Friday, the stock closed at €1,207.20 — a 10.42% single-day rout that marked a 52-week low and left the shares nursing a near-25% loss since the start of the year. On Tuesday, shareholders will gather for the annual general meeting. And in the background, a fresh takeover bid for a Kiel-based shipyard underscores just how aggressively management is pushing into the maritime domain, even as the market punishes any deviation from the consensus.

The trigger for Friday’s sell-off was a first-quarter earnings report that fell well short of expectations. Revenue came in at €1.938bn, up 7.7% year-on-year but a full €362m below the €2.3bn analysts had pencilled in. Earnings per share landed at €2.18 — roughly 59% beneath the consensus estimate. The operating result rose to €224m, with the margin improving to 11.6%, meeting forecasts. Management attributed the revenue shortfall to timing effects: pre-produced trucks for a German customer and increased ammunition deliveries from the new plant in Murcia are slated for recognition in the second quarter.

The market’s reaction was swift and brutal. JPMorgan downgraded the stock to “Hold” on May 8, adding to the pressure. Banco Santander, however, moved in the opposite direction, lifting its rating to “Outperform” with a €1,735 price target. Berenberg and Kepler reaffirmed their buy recommendations, leaving the analyst community split. The price target range — from €1,450 to €2,500 — reflects the uncertainty swirling around the name.

None of this has slowed CEO Armin Papperger’s expansionist agenda. Having already absorbed Lürssen’s naval division, Rheinmetall has now submitted a non-binding offer for German Naval Yards in Kiel, a roughly 400-employee yard owned by France’s CMN Naval. ThyssenKrupp Marine Systems has also tabled a bid, setting the stage for a competitive auction. The newly formed Naval Systems division contributed €77m in revenue in its first month of consolidation, with an EBIT margin of around 10%. Papperger’s ambition is to push maritime revenue to €5bn by 2030. Due diligence results on the Kiel yard are expected in the coming weeks and will signal just how far the company can stretch its naval ambitions.

The broader strategic picture remains compelling. The total order backlog has swelled 32% to nearly €73bn. Management reaffirmed its full-year guidance: 40% to 45% revenue growth, an operating margin of roughly 19%, and a cash conversion rate above 40%. For the second quarter alone, the company expects around €20bn in new orders. A joint venture with Dutch firm Destinus is targeting the start of cruise missile production by late 2026 or early 2027.

Yet the disconnect between the order book and the share price is widening. The AGM on May 12 will be held virtually, with a proposed dividend of €11.50 per share for fiscal 2025 — up from €8.10 the prior year. The ex-dividend date is May 13, with payment on May 15. But the dividend announcement is unlikely to distract from the fundamental question investors are asking: can Rheinmetall execute fast enough to turn its towering backlog into visible cash flow?

The market’s patience is wearing thin. Global defence spending has hit a record $2.9 trillion, and Europe’s rearmament wave provides structural tailwinds. But the sell-off in Rheinmetall — and across the sector — suggests that ambition alone no longer cuts it. Execution is the new currency, and the next few weeks will show whether Rheinmetall can deliver.