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Investing.com - Morgan Stanley (NYSE:MS) has raised its price target on Rheinmetall (ETR:RHMG) AG (ETR:RHM) (OTC:RNMBY) to EUR2,200.00 from EUR2,000.00 while maintaining an Overweight rating on the German defense contractor.
The investment bank expects Rheinmetall to report a "soft Q2" in terms of order momentum, primarily due to the implementation of a new government in Germany and other European countries adopting a "Wait & See" approach ahead of the NATO summit.
For the second quarter, Morgan Stanley projects group sales of EUR2.5 billion, representing 14% year-over-year growth and aligning with consensus estimates, despite production delays of EUR200 million to Q3 caused by an accident in Spain and EUR140 million in sales pulled forward from Q2 to Q1.
The firm anticipates Rheinmetall’s margin will only slightly improve by 20 basis points year-over-year to 12.3% due to a less favorable sales mix and ramp-up costs, while free cash flow is expected to be negative at EUR249 million as the company builds inventory for anticipated second-half demand acceleration.
Despite these quarterly challenges, Morgan Stanley notes that Rheinmetall’s strong first quarter should keep first-half performance in line with full-year 2025 guidance, which calls for sales growth of 27.2% year-over-year.
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