Rheinmetall Stock And 2 Defense Plays Linked To The Ukraine War

The war in Ukraine is no longer just a distant headline; it is reshaping risk and opportunity across defense and energy stocks exposed to the fighting. Escalating Russian offensives, Ukrainian drone attacks on fuel and arms facilities, and rising military losses on both sides are feeding into supply chain tensions, security spending and regional infrastructure damage. For investors, that mix can reward some business models while creating clear pressure on others. This article examines 3 stocks linked to these developments, with 2 that appear positioned to benefit from current trends and 1 that faces clear downside exposure.

Rheinmetall (XTRA:RHM)

Overview: Rheinmetall is a German defense group that makes armored vehicles, weapons and ammunition, and electronic systems such as sensors, air defense and battlefield communications for armies and security customers around the world.

Operations: Rheinmetall generates most of its revenue from Vehicle Systems at about €5.0b and Weapon and Ammunition at about €3.5b, with Germany (€3.9b) and the rest of Europe (€4.3b) its largest regional markets.

Market Cap: €46.2b

Rheinmetall sits at the center of Europe’s renewed focus on defense, supplying long range artillery, air defense and missiles that directly match Ukraine’s battlefield needs. The recent intensification of fighting raises the likelihood of further European orders. Partnerships with groups like Lockheed Martin and new missile and rocket motor plants are designed to scale production as governments look to rebuild depleted stockpiles. At the same time, investors need to weigh concentration in European budgets, the hit from Germany canceling the F126 frigate program, heavy use of external funding and ongoing share price volatility. For investors who can live with policy and execution risk, Rheinmetall provides exposure to a sector that is firmly in the political spotlight, along with a pipeline of contracts and projects that support current growth expectations.

Rheinmetall’s accelerating order pipeline and new missile capacity grab headlines, but the real story sits in how those contracts feed into cash flows, funding needs and future optionality, all laid bare in the DCF valuation analysis for Rheinmetall

Northrop Grumman (NOC)

Overview: Northrop Grumman is a US aerospace and defense company that supplies military aircraft, unmanned systems, space hardware, sensors and missile defense solutions to the US government and allied nations around the world.

Operations: Northrop Grumman generates most of its revenue from Aeronautics Systems (US$13.5b), Mission Systems (US$12.6b), Space Systems (US$10.7b) and Defense Systems (US$8.1b), with smaller intersegment eliminations.

Market Cap: US$76.6b

Northrop Grumman sits at the heart of rising NATO and allied defense budgets, with programs in long range strike, missile defense and space systems that align directly with concerns raised by the war in Ukraine and other geopolitical flashpoints. The company combines this exposure with fundamentals that include a 10.8% net margin, 26.7% ROE and a dividend yield of 1.71%. Earnings growth has trailed the broader US market and relies heavily on large US contracts such as B 21 and Sentinel. Investors also need to factor in meaningful debt and the risk that budget priorities or program execution issues could pressure margins. What separates Northrop Grumman from other defense stocks, however, is the detail of its contracts, valuation and risk profile that headline metrics do not fully capture.

Northrop Grumman’s mix of 10.8% net margin, 26.7% ROE and core US defense programs hints at a story investors may be underestimating, and the real twist sits in the analysis report for Northrop Grumman

Gazprom (MISX:GAZP)

Overview: Gazprom is a Russian integrated energy company that explores for, produces, processes, transports, stores and sells natural gas, oil and related products, as well as generating and selling electricity and heat in Russia and abroad.

Market Cap: RUB4,681.6b

Gazprom might catch your attention because it combines a large integrated gas and oil business with extremely low valuation metrics, a P/E of 2.2x and a share price that sits well below one estimate of fair value, yet it is tightly tied to Russia’s geopolitical and funding risks. Earnings and margins look strong on recent figures, with net income of RUB 1,306,777 million and a 20.3% net margin, but the stock is highly illiquid, heavily reliant on higher risk external borrowing and underperformed both the Russian Oil & Gas industry and the wider market. With Ukrainian drone strikes targeting Russian energy infrastructure and export routes under constant scrutiny, Gazprom offers exposure that may worry investors as much as it interests them.

Gazprom’s low 2.2x P/E and large RUB4,681.6b footprint can mask how geopolitical pressure and funding risks reshape the real trade off here, and the full story sits in the 2 key rewards and 2 important warning signs (1 is major!)

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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