Rheinmetall's €80.4 Billion Backlog Faces a New Test: Cash Burn and a Trimmed Outlook
Published on 08/11/2026 at 18:12 | Redaktion boerse-global.de
RBC Capital Markets waded into the Rheinmetall debate on Tuesday with a fresh "Outperform" rating and a €1,600 price target, even as the defense contractor grapples with a reduced sales forecast and a deepening cash outflow. Analyst Colin Moody's call rests on a bold premise: 35 percent annual EBITA growth through 2030, fueled by Europe's rearmament push.
The timing is telling. RBC's endorsement lands days after Rheinmetall published its final second-quarter figures, which showcased explosive growth alongside a notable blemish — the loss of the F126 frigate program. Revenue for the quarter surged 69 percent to €3.289 billion, while operating profit jumped 115 percent to €562 million, lifting the operating margin to 17.1 percent. Those numbers tell a story of a company firing on all cylinders.
Yet the headline growth masks a more complicated picture. Rheinmetall has trimmed its full-year 2026 revenue guidance to a range of €13.7 billion to €14.2 billion, down from an earlier €14.0 billion to €14.5 billion, citing the F126 cancellation. Management has held firm on its roughly 19 percent operating margin target — a signal that profitability, rather than top-line scale, remains the priority. The half-year figures tell a similar tale: revenue climbed 39 percent to €5.227 billion, with operating profit up 74 percent to €786 million and a margin of 15.0 percent.
The market's reaction has been muted at best. Shares were trading at €1,138.60 on Tuesday, down 0.52 percent on the day, and roughly 21.6 percent below their 200-day moving average. The stock sits 43.05 percent beneath its 52-week high of €2,007.00, reached on October 3, 2025 — though it has clawed back 15.86 percent over the past 30 days.
The Cash Question
The most striking figure in the half-year report isn't revenue growth — it's the operating free cash flow, which plunged to minus €1.616 billion from minus €631 million a year earlier. Management attributes the outflow to inventory buildup for capacity expansion and timing shifts in customer prepayments. That explanation hasn't fully reassured investors, and it explains why analyst sentiment remains split even as ratings skew positive.
Should investors sell immediately? Or is it worth buying Rheinmetall?
The order book, meanwhile, tells a more encouraging story. Backlog reached a record €80.47 billion as of June 30, up from €55.97 billion a year earlier, with firm orders accounting for 70 percent of the total. The company has adjusted its year-end backlog target to €100 billion to €120 billion, reflecting the F126 removal.
That combination — record orders, negative cash flow, and a trimmed forecast — has produced an unusually wide range of analyst price targets. Deutsche Bank Research reaffirmed "Buy" with a €1,800 target last Friday, with analyst Christoph Laskawi among the most bullish voices. Warburg Research followed on Monday with a €1,500 target after reviewing the final half-year numbers, citing positive momentum in both defense and automotive. Jefferies also maintained "Buy," while JP Morgan held at "Neutral." RBC's €1,600 target slots neatly into that spectrum.
A Pipeline of New Business
Beyond the numbers, Rheinmetall continues to expand its operational footprint across multiple fronts. The company and Boeing are pitching the "MQ-28 Ghost Bat" — an unmanned companion aircraft — to the German armed forces. A cooperation agreement with Space Norway targets maritime space surveillance. For the British military, Rheinmetall is supplying the weapon system for the RCH 155 wheeled howitzer.
The domestic pipeline remains active as well. The federal procurement office has ordered 149 additional mobile rescue stations from Rheinmetall Project Solutions GmbH, a follow-on call from a 2024 framework agreement. Rheinmetall MAN Military Vehicles has taken overall responsibility for the "InterRoC VII" research project on automated military logistics.
Fresh international deals add further ballast. CEO Armin Papperger announced Friday that production of ATACMS missiles with Lockheed Martin will begin at the Unterlüß plant, with first revenues expected from 2028 and demand projected for at least 15 years. A contract for Boxer wheeled armored vehicles to the Bundeswehr is expected to be signed by year-end, with Rheinmetall's share of the total order value around €12.4 billion. The German Navy has also commissioned modernization of the frigate "Bayern" to keep it operational through at least 2035, while American Rheinmetall secured an 18-month development contract from the US Army for autonomous, hybrid-powered unmanned ground vehicles.
With consensus earnings per share for 2026 currently at €37.16, the next catalyst arrives November 5, when Rheinmetall reports third-quarter results. For now, the company's trajectory hinges on whether its capacity investments translate into cash generation — and whether the market's patience outlasts the current spending phase.
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