Rheinmetall's Record Backlog Meets a Political Rival: Can Management Turn the Tide?

Rheinmetall's €135bn order book covers 97% of 2026 sales, yet stock falls 39% on Q1 miss, cash flow slump, project delays. Execs roadshow.

Rheinmetall has an order book worth €135 billion, enough to cover 97% of its 2026 revenue target, yet its stock is trading barely above €1,200 – 39% off a 52-week high. That disconnect between a bulging pipeline and a beaten-down share price is forcing the Düsseldorf-based defence group into an unusual position: actively courting investors at a time when political rival KNDS is being fortified by the German and French governments.

The shares closed Thursday at €1,216.40, giving them a 7-day gain of 8.24% but leaving them 14.77% lower over the past month. The year-to-date slide stands at 24.05%, and the stock is trading 26.13% below its 200-day moving average. A relative strength index of 85.6 suggests the recent bounce is more a short-term oversold reaction than the start of a durable recovery.

Management Hits the Road

Top executives appeared at two European investor conferences this week to make the case that the company's growth story remains intact. At the Berenberg European Conference in New York on 21 May, the focus was on expansion in the United States and the build-out of global production capacity. On the same day, Rheinmetall was also present at the Barclays European Leadership Conference in London, delivering a consistent message: scale, delivery capability, and predictable revenues are the pillars that underpin the long-term outlook.

The roadshow comes at a critical juncture. For 2026, Rheinmetall is guiding for group sales of €14.0 billion to €14.5 billion and an operating margin of around 19%. Management is sticking to those numbers despite market scepticism, pointing to the backlog – expected to hit roughly €135 billion by year-end – as evidence that the revenue trajectory is already largely secured.

Q1 Numbers Show a Mixed Picture

The first-quarter results, released on 7 May, underscored why the market remains cautious. Revenue came in at €1.938 billion, up 7.7% year-on-year but well short of the consensus estimate of €2.3 billion. Operating profit rose 17% to €224 million, while earnings per share improved to €2.42 from €1.92. The sticking point was free cash flow: a negative €285 million, weighed down by inventory build-up as the company stocks up to meet future delivery schedules.

For the full year, analysts are pencilling in EPS of €38.55 and a dividend of €15.17 per share, up from €11.50 in 2025. The cash flow turnaround is the key variable – if the inventory build converts to sales as planned, the liquidity picture should improve sharply in the second half.

Two Headwinds That Are Hard to Ignore

The biggest near-term overhang is the reported delay to the "Arminius" project, a multi-billion-euro Bundeswehr order for up to 3,000 Boxer armoured vehicles. The first firm tranche of roughly €12.5 billion is now expected in the second half of 2026, later than some had hoped. For a company that thrives on large-scale procurement programmes, any postponement feeds doubts about medium-term revenue momentum.

Compounding the pressure, the German government announced on 21 May that it will take a 40% stake in KNDS, matching France's holding. The remaining 20% will be floated in an initial public offering in June 2026, valuing KNDS at up to €20 billion. Berlin's entry cost could reach €8 billion. Although the government plans to reduce its stake to 30% within two to three years, the move signals a more interventionist industrial policy that directly challenges Rheinmetall's influence in major European programmes such as the Main Ground Combat System.

Analysts Hedge Their Bets

The KNDS announcement drew an immediate response from UBS, which reiterated a "buy" rating on Rheinmetall but slashed its price target from €2,200 to €1,600 on 20 May. Analyst Sven Weier cited concerns about the company's future positioning in the defence market as state-backed rivals gain clout. Yet he also argued that the sell-off has been overdone, with the market underappreciating Rheinmetall's ammunition growth beyond 2026 and the Boxer programme's contributions.

The tug-of-war between a record order book and a shifting political landscape is unlikely to be resolved in the weeks ahead. All eyes now turn to 6 August, when Rheinmetall publishes its second-quarter results. Investors will want to see whether the inventory build is already translating into higher deliveries and whether management can offer a convincing blueprint for holding its ground alongside a government-anchored KNDS.