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."

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Shares of Pfizer closed at $35.35 yesterday.