Keysight Technologies (KEYS) is expected to report a "small" revenue beat in its fiscal Q2, supported by "strong demand" across defense and communications sectors, Morgan Stanley said in a report Tuesday.

The company is due to report Q2 results after the close next Tuesday.

Morgan Stanley analysts said they expect "a low single digit revenue beat" for the quarter, aligning with recent trends, and expect order numbers to be generally in line with revenue.

Looking ahead, the investment bank expects management to maintain a conservative outlook for fiscal year 2025, which it believes sets the stage for future positive earnings revisions. "Guidance for FQ3 likely to remain conservative passing through beat and leaving FY25 at low-end of 5-7% long-term growth rates," the report said.

Morgan Stanley maintained an overweight rating on the stock, and raised its price target to $180 from $156, expressing confidence in the company's growth drivers.

Shares of Keysight were up 1.7% in recent Tuesday trading.

Price: 165.35, Change: +2.72, Percent Change: +1.67