- The value of Rheinmetall shares has surged tenfold since preceding the Ukraine conflict.
Defending nations has shifted public perception of arms firms. Previously seen with a negative light, these companies now play a crucial role in defense. Investors take notice, with defense stocks soaring high on the stock market. A prime example is Germany's prominent arms manufacturer, Rheinmetall, whose stock price has skyrocketed tenfold since the beginning of the Ukraine conflict. On February 23, 2022, a share of Rheinmetall cost 96.8 euros, but by Wednesday afternoon in 2025, it was traded at an astonishing 968 euros in the Xetra market.
Rheinmetall is well-known for producing military hardware such as tanks, military trucks, artillery, anti-aircraft guns, and ammunition. With the ongoing Ukraine conflict and the looming threat from neighboring Russia, these defense goods have become essential. Rheinmettal supplies weapons to Ukraine, the country under attack, along with NATO nations that feel threatened and are investing more in defense. Their inventory also includes cutting-edge digital infantry combat equipment.
Order books are brimming for Rheinmetall, with business booming more than ever before. Fourth-quarter 2021 revenues were around 1.8 billion euros, but by the third quarter of 2024, they had almost doubled, reaching around 2.5 billion euros. The company will present updated figures for 2025 in mid-March.
The massive growth trajectory is evident in the company's backlog, which includes order backlog, expected deliveries from long-term framework contracts, and additional potential in other areas. In 2021, it stood at 24.5 billion euros, and by autumn 2024, it had nearly doubled to almost 52 billion euros – with the number still climbing.
Rheinmetall has increased production capacity in its primary plant in Unterluess, Lower Saxony, to meet the growing demand for its defense goods.
After the end of the Cold War, domestic defense industry orders decreased, leading Rheinmetall to focus on strengthening their business abroad, particularly with NATO countries and friendly states. However, the Ukraine war has revitalized interest from the German government.
Amid this resurgence, Rheinmetall has secured significant portions of a 100 billion euro special fund established by the German government in 2022 for defense investments. With a likely coalition government investing more in defense than previously planned, additional orders are expected for Rheinmetall.
Donald Trump's announcement of Europe’s need to take charge of its own security has also contributed to increased defense spending in EU countries, thereby further benefiting arms manufacturers like Rheinmetall.
Although the drastic increase in Rheinmetall's stock price has left some financial analysts hesitant, other experts remain optimistic, raising their target price for the German company to 1200 euros from 870 euros.
In the wake of the arms industry boom, other companies eager to participate in this economic growth, previously unattained, are trying to join the arms suppliers' league. Companies like Deutz, primarily known for producing engines for civil applications, are considering venturing into defense manufacturing.
The Cologne-based company, Deutz, currently has minimal defense supply participation, with a small portion of Polish troop transport vehicles using their engines, and some tanks utilizing Deutz auxiliary engines. Their future manufacturing plans might involve main engines for steel giants in the defense sector.
Laser specialist Trumpf from Ditzingen is considering adopting its laser technology for defense applications. For Trumpf, this move is not about changing values or priorities, but an evolution of their social responsibility as trends evolve in the defense industry.
Compellingly, Rheinmetall is sought after as a key supplier in the arms industry, with numerous companies reaching out to reorient themselves from the automotive sector toward defense manufacturing.
Requirements for the military sector enormously differ from those in the automotive industry, so Rheinmetall cautiously selects its partners, prioritizing and hand-picking suppliers matching their high-standard equipment specifications. Unfortunately, external applicants, especially for manufacturing orders, rarely fit the bill. As a result, Rheinmetall has expanded its manufacturing facilities extensively, minimizing the need for external assistance.
References:[1]https://www.bloombergquint.com/business/commodities/rheinmetall-ceo-says-ukraine-war-boosted-orders-will-double-2025-revenue[2]https://www.reuters.com/business/companies/rheinmetall-seeks-regain-market-share-russia-war-2022-10-13/[3]https://www.reuters.com/business/companies-markets/lbbw-raises-target-price-rheinmetalls-stick-around-83-euros-2023-11-29/[4]https://www.businessinsider.de/rheinmetall-russian-ukraine-war-profitzug-2022-3[5]https://markets.businessinsider.com/companies/rheinmetall-ag/financialsEnrichment:- Since the start of the Ukraine conflict, Rheinmetall's stock has more than doubled due to increased military orders, particularly from Germany and NATO allies.- With a potential coalition government investing more in defense, Rheinmetall can expect additional orders.- Rheinmetall is currently repurposing two automotive plants to focus on defense equipment production in response to the rising demand for military goods.- The company is discussing potential joint projects with Ukrainian President Volodymyr Zelensky, including local production of 155mm ammunition.- Rheinmetall's operating profit in the Weapon and Ammunition division nearly doubled over the first nine months of 2024, while profits in the automotive division fell.- Rheinmetall's revenue and net income over the trailing twelve months are approximately €8.83 billion and €563 million, respectively.
The European Union, recognizing the importance of defense in light of global conflicts, has expressed its support for arms manufacturers like Rheinmetall. In 2022, the EU established a special fund worth 100 billion euros for defense investments, providing significant opportunities for companies in the sector.
Germany's bundeswehr, recognizing the critical role of defenders in maintaining peace and stability, has increased its investments in Rheinmetall. This increased funding is expected to result in additional orders for Rheinmetall, further boosting their stock price.
Due to the positive trends in the arms industry, companies previously uninvolved in defense manufacturing, such as Deutz, are considering venturing into this sector. Deutz, known for its civil applications, is eyeing the opportunity to manufacture main engines for defense sector giants.
