Rheinmetall’s Stock Climbs on Citi Upgrade and Joint Cruise Missile Programme Despite Q1 Disappointment

Rheinmetall shares surge 4.5% after Citigroup upgrade to Buy, new long-range missile joint venture, but Q1 revenue miss and overbought RSI signal caution.

Rheinmetall’s shares surged more than 4½% on Monday as a bullish analyst call and a newly announced long-range missile venture helped the defence group claw back ground after a bruising sell-off. The stock closed at €1,178.00, climbing from Friday’s low of €1,123.80 and moving well clear of its 52-week trough of €1,118 – though it still sits a full 41% below the record high of €1,995 touched earlier this year.

The rally was sparked by two distinct catalysts. Citigroup lifted its rating on Rheinmetall from Neutral to Buy, with analyst Charles Armitage arguing that the roughly 45% decline from the peak had gone too far. His new price target stands at €1,408. Armitage pointed out that even a potential ceasefire in Ukraine would not eliminate the structural threat from Russia, and that European governments, including Germany and Sweden, are likely to keep increasing borrowing for defence. That, he said, provides secular tailwinds for the entire sector.

At the same time, Rheinmetall revealed it is pushing ahead with a new joint venture, Rheinmetall Destinus Strike Systems, to mass-produce the “RUTA Block 3” precision-strike system. The cruise missile will have a range of up to 2,000 kilometres and carry a 250-kilogram warhead powered by a T220 turbojet engine. Rheinmetall will hold 51% of the joint venture, with Dutch firm Destinus taking 49%. Production is slated to begin at the company’s Unterlüß plant in Germany by the end of 2026, while design work stays in the Netherlands and component testing takes place in Ukraine. The partners estimate the annual addressable market for the system at several billion euros.

The positive news flow, however, does not erase the disappointment that triggered the rout. Rheinmetall’s first-quarter figures released last month fell short of consensus estimates. Revenue rose 7.7% year-on-year to €1.938 billion, but that was well below what analysts had expected. Operating profit advanced 17% to €224 million. Management attributed the revenue gap to timing delays: pre-produced trucks for a German customer and increased ammunition deliveries from the Spanish plant in Murcia will not be recognised until the second half of the year. The company has maintained its full-year guidance for sales growth of 40% to 45% and an operating margin of around 19%.

Barclays also remains constructive on the stock, citing the €73 billion order book at end-March, Rheinmetall’s strong positions in ammunition and military vehicles, and its ability to sustain high margins. The broker said market sentiment after the weak start to the year had become too pessimistic.

On the charts, the recovery is still fragile. The share price remains well below both its 50-day moving average of €1,440.57 and its 200-day moving average, which it trails by 28.71%. The relative strength index has spiked to 93.2, signalling that the short-term bounce has become overextended. For the uptrend to gain credibility, Rheinmetall needs to establish a sustained foothold above the €1,100 support level and eventually challenge the key moving averages. Until then, the tension between a bulging order book and shaken investor confidence will keep the stock in a tug-of-war.