Key Morningstar Metrics for Rheinmetall
- Fair Value Estimate: EUR 2,220
- Morningstar Rating: ★★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: Medium
What We Thought of Rheinmetall’s Earnings
Rheinmetall RHM group sales rose 13% to EUR 2.8 billion, led by 17% defense growth to EUR 2.3 billion. Operating income rose 19% to EUR 360 million, with margins of 12.9% groupwide and 15.7% in defense. Order intake fell 36% amid the German election, but backlog grew 23% to EUR 63.8 billion.
Why it matters: Delayed order nominations are set to be offset by major contracts in late 2025 and early 2026, mainly in vehicles, ammunition, and electronics, supporting an order intake near EUR 80 billion this year and a backlog approaching EUR 120 billion by mid-2026, in line with our expectations.
- Free cash flow was negative due to inventory buildup ahead of major deliveries and delayed down payments, but management reaffirmed that 20%-30% prepayments on new contracts will normalize cash conversion from late 2025 onward.
- Ammunition capacity is more than doubling, reinforcing Rheinmetall’s core role in Europe’s munitions base. Vehicle output led by Lynx, Puma, and Leopard benefits from automation, while electronic solutions lifts margins through digitization and air defense.
The bottom line: We maintain our fair value estimate of EUR 2,220 as wide-moat Rheinmetall is cementing its position as Europe’s prime contractor, with unmatched breadth and backlog visibility. Short-term risks remain, but structural demand and vertical scale drive long-term upside.
- Rheinmetall continues to strengthen its core business. The proposed naval integration will provide access to EUR 20 billion-EUR 30 billion in German and international orders, while the ICEYE venture anchors Rheinmetall’s entry into dual-use space systems with near-term revenue potential of EUR 2 billion.
