Rheinmetall Shares Tumble as Contract Delays Trigger Another Forecast Cut

Rheinmetall shares dropped more than 17% in early trading on November 5 after the German defense company reduced its full-year outlook, blaming delays in military contracts and ammunition deliveries. The announcement, issued late Wednesday, marked its second forecast reduction since August and brought the stock's losses for the year to about 46%.

The company now forecasts 2026 sales of approximately 13.2 billion euros ($14.9 billion), compared with its previous estimate of 13.7 billion to 14.2 billion euros. It also lowered its expected operating margin to around 18.5% from 19%. The earlier outlook cut followed Germany's decision to abandon warship construction plans that would have represented Rheinmetall's largest order since World War II.

A central factor in the latest revision was a delay to Arminius, a major German military procurement program for Boxer armored vehicles. Rheinmetall now expects the contract to be commissioned in 2027. The vehicles are manufactured by ARTEC, a joint venture between Rheinmetall and the Franco-German defense group KNDS. Setbacks in acceptance testing for artillery ammunition also contributed to the reduced forecast.

The postponed Boxer contract will shift anticipated advance payments into 2027, affecting Rheinmetall's earlier cash conversion target of more than 40%. Nevertheless, the company continues to expect positive operating free cash flow for 2026. It also reported delays to revenue anticipated in the fourth quarter from new business activities, particularly its partnership with Dutch defense technology company Destinus.

RBC analysts described the announcement as "clearly negative," pointing to questions about the Boxer program's schedule, scope and implications for medium-term guidance. They also warned that the developments could deepen broader investor concerns about traditional defense technology, feeding the sector's debate over newer technologies and established systems.

The share price decline contrasts with Rheinmetall's performance during the preceding four years, when its stock recorded an average annual gain of 119%. The company became a major beneficiary of increased military spending by European governments following Russia's full-scale invasion of Ukraine in 2022.

The weaker outlook accompanied substantial growth in Rheinmetall's third-quarter results. Sales rose 32% from a year earlier to 3.15 billion euros, while operating profit increased 62% to 553 million euros. New orders totaled 2.89 billion euros, taking the company's backlog to 78 billion euros at the close of the quarter.

Citi analysts characterized the figures as "a strong set of Q3 results." Those gains, however, were overshadowed by the reduction in annual expectations and the delays affecting contracts, deliveries and anticipated revenue.