RBC Capital reiterated a Top Pick rating on Microsemi Corporation (NASDAQ: MSCC), and raised the price target to $48.00 (from $47.00), following the company's 3Q earnings report. MSCC reported results that were slightly ahead of expectations with revenue and EPS of $431.4M and $0.73 compared to the Street at $430.2M/$0.72.

Analyst Mitch Steves commented, "While revenues were largely in-line, the Company is continuing to see material cost synergies highlighted by 61.9% gross margins in the quarter and a combined 5 cent beat for Jun-qtr results and Sept-qtr mid-point. Importantly, leverage continues to come down and now stands at 3.7x (historically operated at ~2.75x) implying the multiple should improve to normalized levels ~12x vs suppressed numbers of 10x to account for the current debt load. Beyond the balance sheet dynamics, we continue to believe the discount for Microsemi remains unjustified as the stock is trading at ~9x CY17 earnings vs. analog peers (SLAB, ADI, TXN, SMTC) which trade in the high teens. Net Net: with an improved margin profile (potential for 65%/35% gross and operating model) and a decreasing debt-load we reiterate our Top Pick rating."

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Shares of Microsemi Corporation closed at $36.20 yesterday.