According to Berenberg, the recent share price contraction provides investors with an attractive entry point, despite a de-rating of sector multiples. Indeed, Rheinmetall is currently trading at 20x its 2027 expected earnings, while the analyst forecasts a 3-year EPS compound annual growth rate (CAGR) of 31%.

In comments published this morning, the broker highlighted an expected improvement in visibility, with 2027 revenue coverage potentially reaching 72% through the conversion of existing framework agreements. Analysts also anticipate almost a 30% increase in order coverage by end-2026.

The broker says that Rheinmetall could secure up to €80bn in defense contracts by 2026. However, Berenberg has revised its assumptions for the German Boxer Arminius contract down to €23bn, from €32bn previously, leading to an 8% reduction in its 2028 EPS estimate.

Multiple areas for vigilance

Last week, Saima Hussain, who covers the stock at AlphaValue, reported that market attention has recently shifted to the highly profitable Weapon and Ammunition (W&A) division, where €100m in powder sales have been delayed due to administrative lot acceptance controls.

According to AlphaValue, long-term concerns also persist regarding the W&A division, including the possibility of low-cost drones cannibalizing demand for 155mm artillery, as well as increasing competition from the new Diehl-Nammo alliance (a rival European joint venture established for mass ammunition production).

Beyond the W&A division, Rheinmetall's growth strategy is facing significant headwinds: "the highly anticipated missile partnership with Lockheed Martin has stalled due to financial disputes regarding technology transfer, forcing the company to seek alternative partners," Saima Hussain noted.

AlphaValue also pointed to the flagship €80bn Boxer vehicle contract being "dismantled and delayed by the government," as well as "€200m in truck deliveries being blocked simply because the German army lacks drivers to take delivery of them." Finally, "the multi-billion euro F126 naval contract is facing last-minute renegotiations with suppliers."

London contract

It should be noted that the United Kingdom announced on Wednesday evening the acquisition of 72 remote-controlled howitzers (RCH 155) as part of a £1bn contract, including training and support. This contract was awarded by OCCAR to ARTEC GmbH, a joint venture between Rheinmetall and KNDS.

Initial deliveries are scheduled for 2028, and the market reaction has been positive (+1.9% yesterday and +2.2% this morning).