Rheinmetall shares fall as 2026 outlook misses targets

Shares of Rheinmetall AG experienced a significant downturn on Wednesday, falling more than 7% after the company issued a 2026 financial outlook that failed to meet analyst expectations for profitability and cash flow. The Germany-based defense contractor is currently under intense scrutiny as it transitions into a specialized military hardware provider. For the 2026 fiscal year, the company anticipates an operating profit margin of approximately 19%. Although this is an increase from the 18.5% recorded last year, it remains below the 19.6% consensus from analyst polls. Furthermore, the forecast for free cash flow conversion—projected at over 40% of operating profit—fell well short of the 70% to 90% range expected by the market. The company's 2026 sales guidance, ranging between 14 billion and 14.5 billion euros, was largely in line with expectations following 2025 sales of 9.9 billion euros. Financial analysts have noted that the primary concern for investors is the company's operational efficiency in managing its rapidly expanding orders. > Investors are wholly focused on execution and Rheinmetalls ability to convert a compelling order book into sales and EBITA in line with market expectations. The company is moving forward with plans to divest its civilian automotive business by the second half of the year, focusing exclusively on land, air, space, and naval systems. This strategic pivot is intended to capitalize on rising global defense spending linked to ongoing conflicts in Ukraine and Iran. Rheinmetall leadership emphasized that nations are increasingly prioritizing air defense capabilities. The company also noted its role in supporting the United States as it works to replenish its own military stockpiles. > It is inevitable that countries will spend more on air defence for the Iran war. CEO Armin Papperger reported robust growth momentum across NATO member states and highlighted that the company’s order backlog is expected to more than double to 135 billion euros this year from the record 63.8 billion euros seen in 2025. To support this expansion, the firm is considering the acquisition of the German Naval Yards Kiel shipyard and is finalizing a joint venture with Airbus SE and OHB SE for a new military satellite system. Despite the market's reaction to the long-term forecast, the company has proposed increasing its dividend to 11.50 euros.