Rheinmetall’s Twin Track: Satellite Production Ramps Up While Land-System Mega-Deal Slips

Rheinmetall is pushing into new territory – literally into orbit – even as delays on its biggest single land-vehicle contract cast a shadow over the near-term growth narrative. The defence group has struck a partnership with Finnish specialist ICEYE to manufacture SAR radar satellites in Neuss, a move that taps into surging demand for all-weather military reconnaissance from space. ICEYE already operates 72 units in orbit and plans another 60 by 2027, with Rheinmetall acting as the lead industrial partner for the venture.

The broadening of the industrial base comes as the company’s marquee domestic programme, the Bundeswehr’s “Arminius” Boxer vehicle order, slips further out. Chief executive Armin Papperger now expects a contract signing no earlier than the second half of 2026, whereas the market had previously looked for a first- or second-quarter conclusion. The programme, covering up to 3,000 vehicles in multiple variants, carries an estimated total value of around €40 billion, of which roughly €22 billion would fall to Rheinmetall. The delay stems partly from unresolved questions about whether the European procurement agency OCCAR or the Bundeswehr’s own BAAINBw office will act as buyer. Papperger has cautioned that if the military wants to meet its delivery targets by 2029, the contract cannot drag on much longer.

The postponement has already prompted analysts to pare back their expectations. Berenberg cut its price target from €2,100 to €1,750 in mid-May, reducing its revenue assumption for Arminius from €32 billion to €23 billion. UBS lowered its target from €2,200 to €1,600 while keeping a buy rating, and Jefferies trimmed from €2,220 to €1,890, citing higher execution risk. Separately, US asset manager FMR LLC dipped below the 3 percent reporting threshold on May 18, after previously holding 3.09 percent.

Yet the operational engine remains in decent shape. First-quarter sales climbed to €1.938 billion from €1.8 billion a year earlier. Net profit rose to €111 million from €84 million, with earnings per share advancing to €2.42. Rheinmetall has reaffirmed its full-year guidance of €14 billion to €14.5 billion in revenue and an operating margin of roughly 19 percent. The order backlog stood at around €73 billion at the end of March, underlining the breadth of secured demand.

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Alongside Arminius, the company is waiting on the general contractor contract for the F126 frigates, a naval project that has already run later than planned. Tim Wagner, head of the new Maritime Systems division, told Welt am Sonntag that signature is expected in the summer. Rheinmetall’s offer for the programme is reported at around €12.8 billion, with total costs including prior payments reaching roughly €14.8 billion – more than 50 percent above the original estimate. A win would prove the group can assume a bigger role in naval shipbuilding.

Meanwhile, the Bundeswehr has placed a separate order for more than 2,000 unprotected transport vehicles worth around €1.015 billion gross. First deliveries are scheduled to begin in the first half of 2026. And in Lithuania, the new German Panzerbrigade 45 is training with about 2,900 soldiers and 800 vehicles, including Rheinmetall’s Puma infantry fighting vehicle and the Leopard 2 tank, as part of NATO’s “Freedom Shield” exercise.

All this strategic activity has been backed by a convincingly oversubscribed bond placement. On May 28, Rheinmetall issued a €500 million corporate bond with a 3.375 percent coupon and a 2031 maturity. The order book was 7.8 times covered, a clear signal that institutional investors remain willing to fund the expansion. Papperger expects new programme nominations worth around €20 billion in the second quarter, including a Lynx programme in Romania and a main battle tank programme in Italy, with a further €60 billion in opportunities in the second half.

Rheinmetall at a turning point? This analysis reveals what investors need to know now.

At the close on Friday, the stock stood at €1,291.60, notching a weekly gain of 4.33 percent (or 5.75 percent depending on the calculation). Yet the year-to-date decline remains steep at 19.35 percent, and the share still trades about 35 percent below its 52-week high of €1,995. The relative strength index has moved into overbought territory at 84.1, suggesting the recent bounce may be technically stretched. The market is now effectively testing whether Rheinmetall can convert its pipeline of announced chances into firm orders. If F126 and the next wave of nominations come through on schedule, the stock could regain its footing. If they too slip, the valuation discount will look increasingly justified.

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