Pfizer (PFE) PT Lifted to $41 at BMO Capital on Sum-of-the-Parts

BMO Capital analyst Alex Arfaei reiterated an Outperform rating and boosted his price target on Pfizer (NYSE: PFE) to $41.00 (from $39.00) following Q2 results, saying the sum of the parts is looking better and said a split is becoming more likely.

Arfaei commented, "Now $41/share based on the weighted average of DCF ($37, 25%), PEx ($38 25%) and sum-of-the-parts ($44, 50%) valuations, including Hospira. Our SOTP valuation (~$28 Innovative + ~$16 Established) is sensitive to the PEx for the Innovative segment: we assign 18-21x P/E as we estimate the segment to grow EPS by ~18% through 2018. Given this potential to unlock value, and management’s belief that the Established segment has enough scale after Hospira, future M&A will likely be on the Innovative side. If growth and sustainability prospects for the Innovative segment improve with an acquisition, and/or incrementally positive pipeline updates (e.g., immuno-oncology, which management believes is underappreciated), it can garner a higher P/E multiple. Potential tax savings from a deal could provide further upside. Overall, we believe a value-unlocking split is becoming more likely, and given the strengthening Innovative segment, it may not require a large deal. We maintain our Outperform rating."

For an analyst ratings summary and ratings history on Pfizer click here. For more ratings news on Pfizer click here.

Shares of Pfizer closed at $35.35 yesterday.

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