Rheinmetall share price remained in a tight range today, August 5, as investors waited for its financial results. RHM was trading at €1,765, a few points above this week’s low of €1,662. This article explores why the stock may surge after its financial results.
Rheinmetall share price technical analysis
The daily chart shows that the Rheinmetall share price has surged in the past few years, helped by the ongoing demand of military equipment as the war in Ukraine accelerated.
RHM jumped from last year’s low of €433 to the current €1,765. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control.
Most importantly, the stock has formed a bullish pennant pattern, which comprises of a vertical line and a symmetrical triangle pattern. A bullish breakout normally happens when the two lines of the triangle are nearing their confluence.
This confluence is happening a few days before earnings, which is a major catalyst that may push it much higher, especially if the earnings are strong.
Therefore, the stock will likely have a strong breakout, potentially to the year-to-date high of €1,941, the highest point on June 2nd. A break above that level will push it to the next psychological point at €2,000.
RHM earnings ahead
Rheinmettal, the biggest German defense contractor, has been firing on all cylinders amid rising demand. It is a top beneficiary of the ongoing shift of European countries buying defense products made in the region.
Leaders there hope that these investments will create industrial giants that will compete with their American peers like General Dynamics, RTX, and Lockheed Martin.
The company is also benefiting from the recently passed bill to boost German spending by over €500 billion in the next ten years. On Monday, the company announced a new €770 million to supply the Bundeswehr with 1,000 logistics vehicles. This deal is part of a broader €3.5 billion that will see it provide 6,500 vehicles in the next few years.
The most recent results showed that Rheinmtall’s business continued firing on all cylinders. Its revenue jumped by 46% YoY to €2.3 billion, while its operating result jumped by 50% to €199 million.
Most importantly, the company’s backlog continued growing, reaching a high of €62 billion. Its growth is mostly because of its vehicle systems business whose sales jumped by 93% to €952 million.
The weapons and ammunition sales jumped by 66% to €599 million, while the electronic solutions soared by 49% to €427 million. The only laggard was its power systems segment whose revenue dropped to €505 million from €541 million.
The company will provide an update about its partnership with Lockheed Martin and its new facilities to boost production. It will also likely boost its full-year guidance, in which it expects its sales to show 35% to 40% of defense business. Its operating margin will be about 15.5%.
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