Rheinmetall’s Revenue Miss and JPMorgan Downgrade Send Shares to a 52-Week Low

The gap between a record €73 billion order book and a disappointing start to the year has widened into a chasm for Rheinmetall, sending its shares to a fresh 52-week trough. The stock tumbled more than ten percent on Friday, hitting a low of €1,214, and has now shed roughly 24 percent of its value since the start of 2024.

The immediate catalyst was a sharp downgrade from JPMorgan. Analyst David Perry cut his rating on the defence group from “Overweight” to “Neutral” and slashed the price target from €2,130 to €1,500. While Perry remains bullish on the long-term outlook for German defence spending — he sees at least five years of robust growth ahead — he flagged two structural concerns that give him pause.

First, Rheinmetall has missed earnings expectations in four of the last six quarters, a pattern that suggests deeper growth challenges. Second, execution risk is mounting. Since the end of 2024, the company has announced at least ten new joint ventures and partnerships spanning satellites, drones, missiles and naval vessels, alongside three acquisitions since 2022. Perry trimmed his profit forecasts for 2027 through 2030 by three to five percent annually.

The sell-off was compounded by the final first-quarter numbers, which showed revenue of just over €1.9 billion — well short of the €2.3 billion the market had pencilled in. Management blamed operational bottlenecks, specifically delays in delivering military trucks and a slower-than-expected ramp-up at a munitions plant in Murcia, Spain. Those revenues are expected to be recognised in the coming months.

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There were bright spots. Operating profit rose disproportionately to €224 million, pushing the margin from 10.6 percent to 11.6 percent. And the order backlog, swollen by the February acquisition of Naval Vessels Lürssen, which added roughly €6 billion, now stands at a record €73 billion.

That backlog underpins management’s full-year guidance. The Düsseldorf-based group continues to target revenue of €14.0 to €14.5 billion, an operating margin of around 19 percent and a cash conversion rate above 40 percent. CEO Armin Papperger has promised a second-quarter acceleration, pointing to “large-volume orders” in the naval and vehicle segments.

Not all analysts are following JPMorgan’s lead. Bernstein’s Adrien Rabier reiterated an “Outperform” rating with a €2,050 price target, though he stressed the company must convert its record order book into actual growth more quickly. UBS trimmed its target but kept a “Buy” recommendation, while Goldman Sachs dismissed the revenue shortfall as a timing issue.

Amid the share price pressure, Rheinmetall is pushing ahead with its naval expansion. The group has submitted a non-binding bid for the Kiel-based German Naval Yards shipyard, going head-to-head with Thyssenkrupp Marine Systems, which tabled an offer in January. Papperger said due diligence is underway and a binding offer could follow in the coming weeks. Separately, Rheinmetall is working with Switzerland’s MSC to acquire an insolvent shipyard in Romania.

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Papperger has also been buying shares himself, spending around €1 million on 7 and 8 May at prices between €1,303 and €1,405. The insider purchases, while a clear vote of confidence, have so far failed to stem the slide.

Investors can at least look forward to a dividend of €11.50 per share for the past financial year. But the real test will come in the second quarter, when the market expects to see whether those delayed Spanish revenues and promised large orders actually materialise. Until then, the tension between a confirmed outlook and weak near-term earnings momentum is likely to keep the stock under pressure.

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