Key Morningstar Metrics for Rheinmetall
- : €2,380Fair Value Estimate
- : ★★★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
What We Thought of Rheinmetall’s Earnings
Rheinmetall RHM‘s first-quarter sales increased about 8%, operating profit rose 17% to EUR 224 million, operating margin improved to 11.6%, and order backlog reached roughly EUR 73 billion, including naval.
Why it matters: The softer top-line growth largely reflects timing: Around EUR 300 million of finished trucks and ammunition could not be delivered and are expected to ship in the second quarter. Despite “only” 8% sales growth, operating profit increased 17%, demonstrating operating leverage.
- Operating free cash flow was negative EUR 285 million, driven by around EUR 1 billion of inventory build, of which roughly half is finished or nearly finished goods that are expected to convert to cash in the second quarter. The company continues to target more than 40% cash conversion for the full year.
- Fixed contracts already cover almost all 2026 sales, with EUR 44 billion of the backlog in firm orders. Additional large awards in artillery, Boxer vehicles, naval frigates, and Middle East air defense are expected in the coming quarters.
The bottom line: We maintain our EUR 2,380 fair value estimate and believe recent share price weakness is an overreaction to short-term phasing and cash flow optics. The core structural drivers of Rheinmetall’s demand and profit growth are intact and visible well beyond 2026.
- Rising defense budgets in Germany and across Europe, multiyear Ukraine support packages, heightened air defense needs after the Iran conflict, and strong export demand for combat vehicles, along with potential US demand, underpin a durable order pipeline in ammunition, air defense systems, and land platforms.
- For ammunition, Rheinmetall’s heavy investment in powder, modular charges, and shell capacity supports both immediate surge orders and long-term replenishment contracts. For vehicles, its established lines in trucks, Boxer, and Lynx plus ramped factory operations provide scale and production readiness that support attractive economics.
