Rheinmetall’s €2.4 Billion Drone Deal Can’t Lift Shares From a 52-Week Low

The Düsseldorf-based defence group is churning out artillery shells, military trucks and loitering munitions at record pace, yet its stock just hit a 12-month trough. Rheinmetall’s shares closed Friday at €1,341.20, shedding 4.84% on the day and bringing the year-to-date decline to more than 16%. The disconnect between operational momentum and market sentiment has rarely been starker.

China’s tightening grip on rare earth exports is adding a structural layer of uncertainty to the broader sector. Beijing controls roughly 90% of global rare earth processing and dominates tungsten and antimony markets, with export licence approval rates now below 25%. While Rheinmetall itself is not directly on China’s blacklist — unlike Hensoldt, which was added on 24 April — the supply chain risks hang over the entire European defence ecosystem. More than 80% of European companies depend on Chinese sources for critical minerals, and building alternatives is estimated to take two to three decades.

A flurry of contracts, but the chart tells a different story

On 22 April, Rheinmetall signed a framework agreement with the Bundeswehr for the FV-014 loitering munition system, a contract that could reach €2.4 billion. The first tranche, worth around €300 million, covers approximately 2,500 units, with options for a five-figure total. Deliveries are scheduled to begin in 2027.

That same week, serial production of the Kraken K3 Scout unmanned surface vessel kicked off at the Blohm+Voss yard in Hamburg. Initial annual capacity stands at 200 units, scalable to 1,000. The maritime push is part of a broader transformation that has seen Rheinmetall pivot aggressively toward autonomous systems and naval platforms.

CEO Armin Papperger has been touting production records: Germany has overtaken the US in conventional ammunition capacity, military truck output has jumped from 600 to 4,500 units per year, and medium-calibre munitions production has quintupled to four million rounds. For the full year, management targets revenue of €14 billion to €14.5 billion, implying growth of 40% to 45%, with an operating margin around 19%.

Yet the share price has moved in the opposite direction. Chart technicians point to a head-and-shoulders formation that could signal downside risk toward €1,000. Analysts disagree: Jefferies recently lifted its price target to €2,220 with a buy rating, and the consensus among 15 analysts is unanimously positive — zero sell recommendations. The gap between the current price and the average target of above €2,000 is as wide as it has been all year.

Central bank week adds macro noise

The coming days are dominated by monetary policy decisions that could amplify volatility across the defence sector. The Federal Reserve announces its rate decision on Wednesday, followed by the European Central Bank and the Bank of England on Thursday. Markets in much of Europe will be closed on Friday for the 1 May holiday.

Should investors sell immediately? Or is it worth buying Rheinmetall?

For Rheinmetall specifically, all eyes are on 7 May, when first-quarter results are due. The report will need to demonstrate that the production ramp-up is translating into margin improvement. If the numbers are strong, the current support near the 12-month low could hold. If not, the technical picture may worsen.

A sector caught between record orders and supply chain reality

Rheinmetall is far from alone in facing this paradox. Across the Atlantic, Lockheed Martin posted first-quarter revenue of $18.0 billion, flat year-on-year, while free cash flow swung to negative $291 million from positive $955 million. The company’s order intake tells a different story: $7 billion in PAC-3 contracts and a $1.5 billion direct sale of 12 F-16 Block 70 jets to Peru. The Pentagon is planning to order 85 F-35s in fiscal 2027, nearly double the 47 approved for the current year. Lockheed’s shares fell 14% in a week to €434.60, with an RSI of 20.3 deep in oversold territory.

RTX delivered the cleanest quarterly report of the five defence names covered by analysts this week. Revenue rose 9% to $22.1 billion, adjusted earnings per share jumped 21% to $1.78, and the total order backlog swelled to $271 billion. Management raised its full-year guidance: adjusted revenue now seen at $92.5 billion to $93.5 billion, adjusted EPS at $6.70 to $6.90. The median analyst price target sits near $225, with a consensus buy rating. One caveat: roughly 60% of RTX’s defence contracts are fixed-price, while cost inflation in the defence sector runs above the general rate.

Hensoldt, the German sensor specialist placed on China’s export control list on 24 April, faces the most acute supply chain challenge. Its order book hit a record €8.8 billion, up 33% year-on-year, and new orders surged 62% in 2025. But the question is whether that backlog can convert to revenue quickly enough. J.P. Morgan maintains a neutral stance with an €85 price target; the stock closed at €73.32 on Friday, down nearly 6% on the day. Hensoldt reports on 6 May.

Kongsberg Gruppen began a new chapter on 23 April, when trading started after the spin-off of Kongsberg Maritime. The stock opened at around 333 Norwegian kroner and climbed to 401.55 kroner by Friday. The next day, the company was selected for seven projects under the European Defence Fund, with an estimated EU contribution of roughly €280 million — more than 10% of the €1.07 billion fund allocation. Kongsberg’s order backlog stands at approximately 130 billion kroner. Its first quarterly report under the new structure is due on 30 April.

The real test arrives in May

The next two weeks will determine whether the defence sector’s record order flow is translating into profitable growth or whether supply chain frictions and margin pressures are widening the gap between booking and delivery. For Rheinmetall, the 7 May numbers are the moment of truth. The production machine is running at full throttle, the contracts are flowing, and the analysts are bullish. But the share price is telling a different story — and it will take more than a €300 million drone order to change that narrative.