The German defence giant Rheinmetall will report its FY 2025 earnings on March 11.
Rheinmetall RHM
- Fair Value Estimate: EUR 2,220.00
- Morningstar Rating: ★★★★
- Economic Moat: Wide
- Morningstar Uncertainty Rating: Medium
What We Expect from Rheinmetall’s Earnings
Ahead of Rheinmetall’s full year 2025 results, we expect order intake to accelerate in the fourth quarter following a softer mid year period, largely driven by a temporary slowdown in German procurement decisions during the government transition. As budget approvals resumed toward year end and defence spending picked up across Europe - particularly in Germany - we expect delayed programmes to convert into contracts, supporting a rebound in nominations and reinforcing the company’s already elevated backlog.
We see the strongest order momentum in Weapons and Ammunition, reflecting sustained European demand for artillery ammunition and stockpile replenishment. Electronic Solutions should continue to benefit from air defence systems and digitisation programmes, while growth in Vehicle Systems is likely to remain more moderate due to programme timing, despite ongoing contributions from armoured and logistics platforms.
On cash flow, we expect weaker free cash generation in 2025 compared with the prior year, driven by lower advance payments from delayed contract placements, higher inventories built ahead of deliveries, and elevated capital expenditure linked to capacity expansion.
The bottom line: Overall, while procurement timing weighed on orders and cash flow earlier in the year, the underlying demand backdrop remains strong, with year end order intake and backlog growth offering a clearer reflection of Europe’s ongoing rearmament cycle. Rheinmetall is one of our top stock picks in the sector, trading in four-star territory. Despite the recent stock market rally, we see around 20% upside to our fair value estimate.
