Key Takeaways
- Shares of Rheinmetall declined over 2% following first-quarter results that underwhelmed Wall Street projections
- First-quarter revenue reached €1.94 billion, an 8% annual increase, falling below the €2.27 billion analyst target
- Operating earnings climbed 17% to €224 million, yet trailed the anticipated €262 million figure
- The company’s order backlog expanded 31% to an unprecedented €73 billion, incorporating Naval Systems data for the first time
- Management reaffirmed 2026 projections calling for €14–€14.5 billion in revenue and approximately 19% operating margin
The German defense manufacturer reported first-quarter revenue of €1.94 billion, marking an 8% improvement from the €1.80 billion recorded in the same period last year. The figure significantly trailed the Street’s €2.27 billion expectation.
Operating earnings totaled €224 million, representing a 17% year-over-year gain, though it fell below the market’s €262 million projection. The operating margin improved to 11.6% from the prior year’s 10.6%.
Basic earnings per share from ongoing operations increased to €2.18 versus €1.78 in the comparable quarter, yet missed the consensus target of €2.70.
Operating free cash flow registered negative €285 million during the quarter, a notable reversal from the positive €243 million generated a year ago and substantially below analyst forecasts of positive €181 million.
Shares tumbled more than 2% Thursday as investors digested the report. The widespread misses across critical financial metrics overshadowed the company’s underlying expansion.
Unprecedented Order Book Provides Optimism
A bright spot in the quarterly release was the order backlog, which soared 31% to €73 billion from €56 billion in the year-earlier period. The inclusion of Naval Systems for the first time contributed an order backlog of €5.50 billion.
New order intake, however, plummeted 55% to €4.90 billion versus €10.70 billion in the comparison quarter. Rheinmetall attributed the decline to several exceptionally large contracts secured in the prior-year period.
Goldman Sachs researchers observed that investors would probably concentrate on Germany’s demand environment and anticipated timing of future orders.
Missile Production Expansion and Strategic Collaborations
Beyond quarterly financials, Rheinmetall announced ambitious plans to enter cruise missile manufacturing. The defense contractor revealed intentions to begin producing sophisticated cruise missiles alongside Netherlands-based Destinus beginning in Q4 2026 or early 2027 via a newly established joint venture, Rheinmetall Destinus Strike Systems, where Rheinmetall maintains a 51% controlling interest.
The Destinus Ruta Block 2 missile successfully completed flight testing in late April. The weapon boasts a range exceeding 700 kilometers and targets critical infrastructure capabilities.
Chief Executive Armin Papperger disclosed that negotiations with Lockheed Martin regarding rocket and missile production facilities in Germany are advancing more slowly than anticipated, citing disputes over financial burden sharing. He indicated Rheinmetall is simultaneously exploring missile collaboration opportunities with Raytheon.
Papperger expressed optimism for second-quarter performance, highlighting substantial incoming orders in naval and vehicle divisions, alongside full-capacity operations at the Murcia ammunition facility in Spain following last year’s incident.
Rheinmetall has also submitted a preliminary offer for German Naval Yards Kiel and is evaluating the potential acquisition of portions of Romania’s Mangalia shipyard as components of its naval sector expansion strategy.
The company confirmed ongoing discussions with multiple Middle Eastern nations to supply up to 10 air defense platforms this year, driven by heightened regional instability related to the U.S.-Israel confrontation with Iran.
Full-year 2026 guidance stands unchanged: projected sales of €14 billion to €14.5 billion with an operating margin near 19%.
