Three defense stocks have fallen as much as 48%. Peace threatens only one of them
Rheinmetall, Hensoldt, and GE Aerospace all carry the same label, and all three are falling. But Ukraine talks realistically affect the profits of only one of them. The market is punishing the other two for something entirely different.
Key points
Rheinmetall is 47.9% below its peak, despite having an order backlog of 80.5 billion EUR.
On the impact of a peace deal on demand, Rheinmetall’s CEO says: "We see absolutely no impact."
Hensoldt lost a contract worth more than 200 million EUR this year, but it had nothing to do with Ukraine.
GE Aerospace increased orders by 49% and raised its outlook, yet its shares fell after the results.
For GE, the consensus of 36 analysts points to 386 USD
The sector that drove the market for two years fears a single headline
Since 2024, European defense companies have been the continent’s most reliable bet. Now a single diplomatic headline is enough to send them tumbling. After U.S. envoy Steve Witkoff met with Zelensky and Putin, both sides confirmed that trilateral talks would take place in Abu Dhabi in the first half of November. As early as October 19, when Washington paused a new package of sanctions against Russia, Rheinmetall $RHM.DE lost almost 3% in a single day.
The market is throwing Hensoldt $HAG.DE and American company GE Aerospace $GE into the same basket. All three have Aerospace & Defense listed as their sector, and all three are far below their peaks.
Company | Price (27. 10.) | Peak | Change from peak | P/E |
|---|---|---|---|---|
Rheinmetall | 1 025,20 EUR | 1 966 EUR | -47,9 % | 66,6 |
Hensoldt | 86,22 EUR | 117,70 EUR | -26,7 % | 82,9 |
GE Aerospace | 297,66 USD | 388,84 USD | -23,4 % | 33,9 |
Three declines, one label, three different reasons. Only one is related to peace.
Rheinmetall: CEO promises peace will have no impact, while the market has wiped out half the share price
Rheinmetall is 47.9% below its yearly high and has lost 41.2% over the year. Operationally, though, the company is experiencing the best period in its history. In the first half of 2026, revenue rose 39% to 5.2 billion EUR, operating profit climbed 74%, and the order backlog, including framework agreements, reached 80.5 billion EUR. That is almost double the company’s entire market capitalization (47.7 billion EUR).
CEO Armin Papperger told Bloomberg last December that a peace deal in Ukraine would not change demand for weapons, because Europe is rearming after decades of cuts.
"We see absolutely no impact."
Armin Papperger, CEO of Rheinmetall
The market does not believe him, and the stock is behaving like a bet on headlines from Abu Dhabi. And this is where the valuation paradox begins. A trailing P/E of 66.6 looks like the price of a growth tech company, not a manufacturer of tanks and ammunition. But based on estimated 2026 earnings, the forward P/E falls to 28.3, and based on the 2027 estimate (EPS 53,96 EUR), to just 19. None of that holds, however, if Rheinmetall stops growing after 2030. That was the argument made by Berenberg when it downgraded the stock to Hold on October 9 and cut its target from 1 600 to 1 020 EUR. Its concern was not peace, but what the company would use to fill its new factories once the current rearmament wave fades.
Bulios’ fair value of 1 070 EUR is only 4% above the market price. In other words, the market has already priced in much of the peace scenario. The balance sheet, however, is not without risk. Operating free cash flow for the half-year came in at -1.6 billion EUR due to inventory and investment, and on October 8 the company doubled its credit facility to 1.5 billion EUR.
Hensoldt: It wasn’t peace that took away its contract, but its own government
Radar manufacturer Hensoldt is around 27% below its all-time high of 117,70 EUR from October 2025 and has lost 10.2% over the year. But it has gained 14.2% over the past month, after two banks upgraded it to Buy. Its biggest setback this year did not come from peace talks. It came from Berlin: at the end of June, the Ministry of Defense canceled the F126 frigate program, for which Hensoldt was supplying the radar. The entire contract was worth more than 200 million EUR, and over a third had already been booked. Germany is rearming at a record pace, but cutting projects where things have stalled.
Yet the half-year figures look like a textbook example of growth. Orders doubled to 2.8 billion EUR, and the order backlog topped 10 billion EUR for the first time, reaching 10.36 billion. But adjusted free cash flow was negative, at -136 million EUR, and the company itself admits that this part of the financial statements will be decisive.
"The high volume of new orders confirms confidence in our solutions. But that is not our end goal. What will continue to matter is how reliably and profitably we can turn our order backlog into revenue and profit."
Christian Ladurner, CFO of Hensoldt
Here’s the problem. At a P/E of 82,9, investors are paying for earnings that so far exist only in the order backlog. Bulios’ fair value of 69,50 EUR is 19% below the market price, and research firm mwb research maintains a Sell rating with a target of 62 EUR; according to the firm, around 40% of Hensoldt’s revenue is tied to armored vehicles, which Germany’s budget could slow down just as easily as frigates. The risk for Hensoldt is not a ceasefire. It is Berlin’s budget calendar and how quickly a radar in an order becomes a radar on an invoice.
GE Aerospace: A defense company that doesn’t care about peace, yet is still falling
GE Aerospace is 23.4% below its yearly high and has lost 15.1% in three months. Peace in Ukraine has nothing to do with it. In the third quarter, orders rose 49%, revenue climbed 18%, and adjusted earnings per share increased 36%; the company raised its full-year earnings outlook to 8,00 to 8,10 USD per share, and its commercial engine services backlog exceeds 170 billion USD.
"We delivered strong results this quarter, with solid demand driving a 49% increase in orders, strong growth of 23% in commercial services, 18% in total revenue, and 36% in earnings per share."
H. Lawrence Culp Jr., Chairman and CEO of GE Aerospace
The Defense & Propulsion Technologies division generated 3,47 billion USD of 13,3 billion in revenue, but just 475 million USD in operating profit. Civilian engines and their services earned 2,89 billion. Defense therefore accounts for roughly 14% of segment profit. If a peace deal were signed tomorrow, it would barely show up in GE’s income statement.
Yet the stock fell after the results. Free cash flow for the quarter dropped 14% to 2 billion USD, margins in the civilian division narrowed slightly, and certification of the new GE9X engine for the Boeing 777X continues to be delayed, meaning delivered units are not yet counted as revenue. Fears of higher fuel costs and airline capacity cuts are also growing. GE depends on flights, not wars. The consensus of 36 analysts points to 386 USD.
What will matter: three dates in November and one signal from Abu Dhabi
November will decide the fate of all three, but in different ways:
On 5. 11., Rheinmetall and Hensoldt report before the market opens. The market expects earnings of 7,00 EUR per share for Rheinmetall and a loss of 0,49 EUR for Hensoldt.
On 10. 11., Hensoldt holds its Capital Markets Day in London; on 12. 11., the German budget committee meets.
On 26. and 27. 11., Rheinmetall holds its Capital Markets Day.
Trilateral talks in Abu Dhabi in the first half of November.
GE does not report until 21. 1. 2027.
Signals to watch to see which scenario is playing out: for Rheinmetall, watch whether the order backlog stays above 80 billion EUR even after peace headlines. The Italian contract worth 3,7 billion EUR from a joint venture with Leonardo, reported by Reuters citing the Italian press, has not yet been confirmed by the company. For Hensoldt, cash flow will be decisive, along with whether it raises its revenue outlook above 2,75 billion EUR. For GE, watch LEAP engine deliveries, the GE9X certification date, and the price of oil.
And what about a ceasefire scenario? It would not affect GE at all. Hensoldt would be affected only indirectly, through the German budget, where priorities are debated even more in peacetime. Rheinmetall is the only one of the three whose share price today depends on what happens at the negotiating table. Its CEO says nothing will change after peace. So far, the market has refused to give back half the share price.
