Rheinmetall's Growing Share of Orders Improves Backlog Quality and Cash Flow Outlook; FVE Up 7%

Rheinmetall has a well-diversified portfolio across geographies and platforms, with 80% of its revenue from its defense business and 20% from its civil one. Escalating global security concerns are driving higher growth in the defense market as many countries in Europe have underspent since the Cold War ended. Given the latest developments, including talks about a potential US pullback and increasing pressure from the US for Europe to boost defense budgets, we expect European defense spending to reach 3.1% of gross domestic product by 2029, up from 2.4%, and to reach 3.5% by 2032 (2.8% previously). This situation offers a significant opportunity for Rheinmetall to benefit from its well-diversified geographical presence and product portfolio.