Bundeswehr awards significant contract to Rheinmetall - Analyst anticipates substantial opportunity
Rheinmetall's Growth Potential Soars with Military Truck Acquisition and Large German Orders
Rheinmetall, a leading German defense company, is set to expand its presence in the military vehicle market with ongoing negotiations to acquire Iveco's military truck business and recent large orders from the German military.
The potential acquisition, currently in discussion with Italian defense conglomerate Leonardo, would give Rheinmetall control over a key segment in military logistics vehicles. This move is expected to strengthen Rheinmetall's position in military land systems significantly.
In the first half of 2025, Rheinmetall's Vehicle Systems sales surged by 46% year-on-year to €1.9 billion, primarily due to the delivery of logistics vehicles and the launch of tactical vehicle programs, including those for the German military. The operational result also improved significantly, boosted by increased sales from logistics vehicles and related services, indicating profitability growth alongside sales expansion.
The German military has placed a large order for pre-produced swap body trucks and new tactical vehicles, a testament to Rheinmetall’s growth and robust demand in domestic defense logistics systems. This strategic contract, set to be booked in the third quarter and delivery expected to commence in 2025, underscores Rheinmetall’s strong market position and secures capacity for years to come.
Rheinmetall is also investing substantially in expanding production capacity, including a new Lower Saxony plant to increase output for artillery ammunition and vehicle production.
Chloe Lemarie from Jefferies views Rheinmetall as her "Top Pick" in the defense industry, maintaining her buy rating for Rheinmetall shares. Given yesterday's closing price of €1,748, Lemarie sees significant upside potential for Rheinmetall shares, raising her price target to €2,250.
This strategic move, if successful, positions Rheinmetall to benefit from rising European defense budgets and modernization efforts, particularly for land defense systems, which are expected to experience sustained growth. By integrating Iveco’s truck business and capitalizing on significant German military contracts, Rheinmetall is poised for strong expansion in its military vehicle segment, with growing sales, improved margins, and enhanced production capacity supporting its outlook.
[1] Reuters: Leonardo to buy Iveco Defence Vehicles for €1.7 billion [2] Rheinmetall AG: Half Year Report 2025 [3] Reuters: Rheinmetall in talks to buy Iveco's military truck business - sources [4] Rheinmetall AG: Press Release - New Plant for Artillery Ammunition and Vehicle Production [5] Reuters: European defense spending to rise 4.3% in 2021, up from 1.4% in 2020 - report
- Rheinmetall's strategic move to acquire Iveco's military truck business, currently in discussion with Leonardo, has the potential to expand their influence not only in the military vehicle industry but also in the wider finance and aerospace sectors, as the defense industry often has synergies with these areas.
- With the influx of revenues from large domestic orders, such as the latest one for pre-produced swap body trucks and new tactical vehicles from the German military, Rheinmetall's growth is attracting attention beyond the defense industry, signaling strong business prospects in finance and the aerospace sector as well.
