Valuation discount underpins RBC's view
Rheinmetall's revised annual earnings targets for EBITA stand 8% below the consensus estimate, Moody wrote in a research note available on November 4, according to dpa-AFX Analyser. Nevertheless, the Canadian bank kept its "Outperform" rating and price target of 1,600 euros.
Moody pointed to a valuation discount of just over 50% to the sector as a reason the disappointment might already be priced in. He continues to expect Rheinmetall to benefit from rearmament in Europe.
Procurement delays reduce annual outlook
Rheinmetall's November 4 announcement lowered its 2026 revenue forecast to about 13.2 billion euros from a range of 13.7 billion to 14.2 billion euros. The company also cut its expected operating margin to about 18.5% from around 19%, attributing the margin reduction to a change in the product mix of annual revenue.
The company no longer expects to receive the order for the Boxer "Arminius" project in 2026 because of a likely delay in the contract award. The associated advance payments and revenue contributions are consequently shifting into the new year. Expected delays in batch approvals for artillery ammunition will also move revenue into 2027.
Rheinmetall said some revenue opportunities originally targeted for the fourth quarter in its new business activities would not be realized this financial year, specifically in its cooperation with Dutch company Destinus.
This was Rheinmetall's second guidance cut of 2026, according to Dow Jones Newswires, as published by Morningstar. The company had reduced its sales forecast in August after Germany scrapped a procurement project for what could have been the country's largest class of warship since the end of World War II.
Quarterly profit beats expectations despite revenue miss
The preliminary third-quarter figures showed revenue rising 32% to 3.149 billion euros from 2.308 billion euros a year earlier. Operating profit increased 62% to 553 million euros from 342 million euros, while the operating margin reached 17.5%, up from 14.8%.
The results were mixed against analysts' expectations. Dow Jones Newswires, citing Vara Research consensus figures, reported that revenue of about 3.15 billion euros fell short of the 3.25 billion euros forecast. Operating profit and margin, however, exceeded estimates of 531.4 million euros and 16.3%, respectively.
Third-quarter order intake totaled 2.893 billion euros, a level Rheinmetall characterized as good but slightly lower. Operating free cash flow remained negative at 82 million euros, compared with negative 168 million euros a year earlier. The company still expects positive operating free cash flow for the full year but has withdrawn its target for a cash conversion rate above 40%.
Rheinmetall said it would publish its full third-quarter report on its website on November 5, 2026, at 7:30 a.m. CET.
