Karman (KRMN) is well positioned to benefit from stronger missile and space demand, while management remains confident that organic growth and bookings will accelerate in the second half of 2026, RBC Capital Markets said.

The $94 million Walker Precision Engineering deal gives Karman a European manufacturing base and adds products used in missile guidance systems, the brokerage said in a note Thursday.

Management remains confident organic growth and bookings will strengthen in H2 amid a sharp increase in bids and defense funding beginning to flow from prime contractors to suppliers. The brokerage also noted Karman recently secured a $21 million contract for the MK 54 torpedo.

Free cash flow remains an important concern, but Karman has room to improve collections and working capital management through 2027, RBC said, adding that it believes concerns over dual sourcing are overstated, and that supply problems at some competitors could help Karman gain market share.

Stronger free cash flow growth will be important in addressing investor concerns about earnings quality and margin sustainability, according to the note.

RBC maintained its outperform rating and lowered its price target to $85 from $100.

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