Investing.com -- Morgan Stanley analysts said the semiconductor production equipment industry's April-June results showed few positive catalysts, with Advantest emerging as a clear standout among Japanese equipment makers.

Disco, Lasertec and JEOL reported key performance indicator guidance aligned with Morgan Stanley forecasts, but their shares fell after earnings as market expectations appeared high ahead of results.

Advantest raised its full-year guidance and plans to increase its capacity outlook. Morgan Stanley said the results point to upside even beyond its forecasts for the next fiscal year, which the firm said were at the high end of market expectations before earnings with operating profit of about ¥1.1 trillion.

The wafer fabrication equipment outlook is strengthening, led by DRAM and advanced logic and foundry segments, Morgan Stanley said. The firm previously expected 2027 DRAM WFE growth to slow to just under 30% from nearly 60% year-over-year in 2026.

Several equipment makers indicated during earnings season that DRAM growth in 2027 should outpace other applications, suggesting stronger-than-expected DRAM investment growth, according to the note. Major semiconductor manufacturers have presented strong capital expenditure outlooks in foundry and logic fields, strengthening the 2027 outlook relative to Morgan Stanley's prior forecast.

Morgan Stanley maintains Advantest as its top pick, expecting the company's results and guidance to continue confirming demand strength. The firm said an update to Advantest's capacity expansion plan, expected with July-September or October-December results, could provide another catalyst.

Morgan Stanley also favors Tokyo Electron, whose shares have recovered only modestly following the July correction. The firm sees upside to current consensus second-half sales and profit as the WFE outlook moves higher for 2026.