Rheinmetall hit by initial 2026 guidance deemed "cautious"
In Frankfurt, German defence industry giant Rheinmetall (-7.83% at EUR1,546) was one of the biggest fallers in the DAX index amid forecasts seen as more cautious than markets had expected.
Rheinmetall's management confirmed targets in line with expectations for 2025, with strong FCF generation focused exclusively on the defence business. In contrast, AlphaValue said that the first outlook for 2026 was "prudent", with projected revenue of €15bn to €16bn and an EBIT margin of between 18% and 20%.
"Analysts were looking more at 20% than 18%," said analyst Saïma Hussain, who described the projections as "not exceptional, but rather prudent".
"The stock remains exposed to concerns over the sustainability of margins, as growth remains heavily dependent on weapons and ammunition. As a result, despite a correction of around 4% already seen before the call, we do not rule out a further short-term decline," she added.
Meanwhile, Jefferies reiterated its buy rating on Rheinmetall shares, albeit cutting its target price to €2,060 (from €2,170).
The broker noted that 2026 guidance implies revenue of between €13.2bn and €14.1bn, about 12% below the consensus, with an expected operating margin of between 18% and 20%, corresponding to EBIT of €2.4bn to €2.8bn, also below expectations.
According to Jefferies' comments, the gap is largely due to a more gradual ramp-up of certain activities and the partial consolidation of NVL over ten months, as well as delays on the F126 naval program.
The note nonetheless points to solid order and cash-generation prospects, with up to €80bn of order intake expected in 2026 and customer advances that could reach €3.75bn on the Boxer contract, leading the research house to judge that fiscal year 2026 is now "largely de-risked".
Finally, Berenberg also reiterated its buy rating on Rheinmetall, with a target price cut to €2,100 (from €2,200). The broker likewise cited revenue 12% below the consensus, due to weaker-than-anticipated growth across all defence divisions, including naval activities.
The note said long-term visibility remains solid, underpinned by an order intake target of up to €80bn in 2026, including €67bn from German defence contracts, which strongly supports future cash flows.
The broker added that cash generation should be "exceptionally strong" in 2026 thanks to high customer advances, despite a downward revision to medium-term EPS estimates.
Rheinmetall AG specializes in the design, manufacture and marketing of equipment, components and solutions for the military and civilian industries. Net sales break down by family of products as follows:
- vehicle systems (38.7%): multi-purpose wheeled and tracked vehicles (tactical military vehicles, support vehicles, logistics vehicles and special vehicles);
- weapon and ammunition systems (26%): automatic cannons for land, air and sea vehicles, smooth-bore weapons, artillery systems, smart projectiles, high-energy lasers, etc.;
- sensors, actuators and power systems (20.8%): actuators, exhaust gas recirculation systems, throttle valves, exhaust gas dampers for electric motors, solenoid valves, pumps, etc. used in thermal and fluid management applications in the mobility and industrial sectors;
- electronic solutions (13.5%): sensors and networking systems, cyberspace protection solutions, air defense systems, radar systems, technical documentation solutions, integrated electronic systems, drones and automated ground robots, training and simulation solutions;
- other (1%).
Net sales are distributed geographically as follows: Germany (30.4%), Europe (46.6%), Asia and Middle East (9.6%), Americas (7.6%) and other (5.8%).
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