Shares in Düsseldorf-based Rheinmetall AG dropped more than 17% by 10:00 CET on Thursday after the German defence manufacturer lowered its annual sales and operating margin projections. In a Wednesday evening statement, the firm stated it now projects revenue of approximately €13.2bn for 2026, marking a decrease from its prior projection of €13.7bn to €14.2bn. The anticipated operating margin was revised to approximately 18.5%, down from 19%.
The downward revision stems primarily from a major German military contract under the Arminius project, which the company stated is now unlikely to be awarded this year. This delay shifts the corresponding advance payments and revenue into 2027. The Arminius initiative involves Germany's planned large-scale procurement of Boxer wheeled armoured vehicles, manufactured by Rheinmetall alongside fellow defence group KNDS. Furthermore, Rheinmetall anticipates lower-than-projected revenue from newer ventures within its weapons and ammunition division, notably its partnership with Dutch firm Destinus. Additional delays regarding acceptance checks for batches of artillery ammunition will likewise defer certain revenues into 2027. Despite these setbacks, the arms manufacturer still anticipates positive operating free cash flow for the full year.
This marks the second sales forecast reduction for the defence group this year, following a similar downward revision in August after Germany cancelled the F126 frigate programme. Rheinmetall had anticipated securing a substantial role in that initiative, and its cancellation lowered projected annual revenue by €300m, though the operating margin forecast remained unaltered at that time.
Concurrently, Rheinmetall reported third-quarter results meeting expectations, with sales rising 32% to €3.149bn from €2.308bn in the corresponding period of the previous year. Operating profit for the quarter ending September 30 climbed 62% to €553m from €342m, lifting the operating margin to 17.5% from 14.8%. Order intake reached €2.893bn, which management characterized as a good, albeit slightly lower, level. For the initial nine months of the year, sales increased 38% to €8.4bn, while operating profit advanced 69% to €1.339bn. Company shares have declined more than 48% since the beginning of the year, paring some of the substantial gains achieved over the prior three years.
Broader European defence equities also experienced selling pressure on Thursday. By approximately 10:00 CET, shares of BAE Systems declined more than 4%, Leonardo retreated 2.8%, Thales decreased 0.9%, while Babcock and Saab dropped 1.3% and 2.7%, respectively. These declines succeeded Wednesday losses driven by anxieties surrounding heightened scrutiny of United States military expenditures following the Democrats' electoral victory. Vertical Research Partners analyst Robert Stallard anticipated increased congressional oversight regarding defence policy and spending in a client note cited by MarketWatch.
In response to the warning, JPMorgan reduced its price target for Rheinmetall to €1,150 from €1,350 while maintaining a Neutral rating. Analyst David Perry raised questions regarding the long-term sales trajectory for certain army products and targets associated with joint ventures announced since October 2024, while also cautioning that the firm might be forced to lower its 2030 targets.
