SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

   Technology StocksVerizon Communications (VZ)


Previous 10 Next 10 
From: Jon Koplik7/18/2023 2:10:33 AM
2 Recommendations   of 2073
 
WSJ -- Telecom stocks continue slide after WSJ investigation into toxic lead cables ...................................

WSJ

July 17, 2023

AT&T Shares Fall to Lowest Price Since 1993

Telecom stocks continue slide after WSJ investigation into toxic lead cables

By Hannah Miao

Shares of AT&T dropped to their lowest closing price in three decades, extending recent losses after a Wall Street Journal investigation into toxic lead cables left behind by telecommunications companies.

AT&T’s stock fell 6.7% on Monday to $13.53 a share, its lowest close since February 1993. Shares have declined 13% since the investigation published July 9 revealed how telecom companies like AT&T have left behind more than 2,000 old lead-encased cables across the U.S., relics of the old Bell System’s regional telephone network.

Journal testing found numerous cables leaching lead into soil and water at levels exceeding regulatory safety guidelines. Wall Street analysts have since raised questions about liabilities related to the cables and the potential impact on companies’ bottom lines. Some firms have downgraded their ratings on some telecom stocks.

“It’s really the fear of the unknown,” said Frank Louthan IV, a managing director and telecommunications-services analyst at Raymond James. “It’s very difficult to quantify how much of this network is out there. It’s difficult to quantify the cost. It’s difficult to quantify the liability.”

Shares of Verizon Communications pulled back 7.5% on Monday, their worst one-day performance since October 2008, and closed at their lowest level since September 2010. Verizon was the worst-performing stock in the Dow Jones Industrial Average.

Frontier Communications Parent, which owns networks acquired from legacy Bell companies, dropped 16%. Lumen Technologies, another telecom company with Bell assets, shed 8.1%.

AT&T previously said the Journal’s reporting on potential harm connected to lead cables “conflicts not only with what independent experts and long-standing science have stated about the safety of lead-clad telecom cables but also our own testing.”

AT&T, Verizon, Frontier and Lumen together have lost about $36 billion in market value since the publication of the WSJ investigation, according to Dow Jones Market Data.

AT&T didn’t immediately respond to requests for comment about the share slide. A Verizon spokesman said in an email the company has been modernizing its network for two decades and only a small percentage of the existing network currently includes lead-sheathed cable. Verizon has started its own testing of several sites and is “taking these concerns regarding lead-sheathed cables very seriously,” he said.

“We have not seen, nor have regulators identified, evidence that legacy lead-sheathed telecom cables are a leading cause of lead exposure or the cause of a public health issue,” a spokesperson for industry group USTelecom said. “Many considerations go into determining whether legacy lead-sheathed telecom cables should be removed or should be left in place.”

Wall Street downgrades in the sector continued Monday, as analysts at Citigroup on Monday reduced their ratings on AT&T, Frontier and Telephone and Data Systems to “neutral/high risk” while remaining “neutral” on Verizon.

“The industry’s historical use of lead sheathed cabling is likely to remain an overhang for the stocks and valuation for at least a few months and potentially longer until the market can better measure the financial risk,” Citigroup analyst Michael Rollins wrote in a report.

New Street Research last week estimated removing all lead-cased copper wires across the U.S. could cost as much as $59 billion.

Raymond James’s Louthan said he believes the costs for removing lead cables are lower than some other projections on Wall Street. He estimates the cost per mile of cable would be around $4,000, factoring in environmental remediation.

The telecom companies are set to report quarterly results in the coming weeks, with analysts and investors expecting to hear from corporate management in the aftermath of the Journal investigation. Verizon and AT&T are due to report earnings next week, while Lumen and Frontier are slated for the week following.

“The carriers have not made much of a statement, unfortunately. Hopefully, they will correct this on their earnings calls next week and be able to get investors some color on what the exposure is from a network perspective,” Louthan said.

Write to Hannah Miao at hannah.miao@wsj.com

Copyright © 2023 Dow Jones & Company, Inc.

.
.
.

Share RecommendKeepReplyMark as Last Read


From: Ms. Baby Boomer7/19/2023 12:24:12 PM
   of 2073
 
Verizon Business introduces global IoT eSIM platform with network-operator
partners around the world....


finance.yahoo.com

M

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


From: Jon Koplik7/22/2023 2:13:45 PM
1 Recommendation   of 2073
 
Barrons -- Are AT&T and Verizon’s Dividends Safe ? What the Math Says ........................

Barrons

July 19, 2023

DIVIDENDS
INCOME INVESTING

Are AT&T and Verizon’s Dividends Safe? What the Math Says.

By Al Root

Just when you thought it couldn’t get any worse for AT&T and Verizon Communications, shares of the two telecom titans have been hammered in recent days after The Wall Street Journal reported on copper telecommunications cables that had been wrapped in lead. Though it didn’t contain any numbers, it warned about the potential health impact of the decades-old wires and the potential costs to clean them up.

AT&T shares (ticker: T) are off 13% since the article ran on July 9, and Verizon stock (VZ) is down about 10%. The S&P 500 index has gained 3% over the same span. The drop has sent the dividend yields of both stocks soaring, with AT&T and Verizon now yielding 8.3% and 8.1%, respectively. Those are attractive dividends -- if they are safe.

At the risk of sounding Panglossian, they just might be. The market is taking a sell-first-and-ask-questions-later approach to AT&T and Verizon shares. Yet the math shows that both companies have the cash flow to support their payouts. For income investors with a strong stomach, they might just be worth taking a flier on.

Of course, doing the math requires numbers, and that’s where the uncertainty starts. Lead-wrapped cables aren’t a new issue -- the industry phased them out decades ago. The cables are actually so old that it’s unclear even where they are located and who owns them. “So how big a deal is this?” asked MoffettNathanson analyst Craig Moffett in a Monday report. “The unsatisfying, but honest, answer is that at this point we have nothing but unknowns to work with and no real way to quantify the companies’ exposures.”

Other analysts felt similarly -- and turned their concerns into actions. J.P. Morgan analyst Philip Cusick downgraded AT&T stock on July 14, despite a “record-low valuation,” citing slowing growth as well as the “overhang from potential lead liability.” Citigroup analyst Michael Rollins downgraded AT&T shares on Monday for similar reasons. Verizon stock also caught a downgrade Monday from Edward Jones analyst David Heger.

New Street Research analyst Jonathan Chaplin took a stab at quantifying the potential liability. He came up with a framework that tried to capture the unknown both in terms of the percentage of cables that will need to be remediated and the cost of replacing them. His estimated total? $60 billion, with AT&T accounting for $35 billion of that and Verizon on the hook for $8 billion.

If AT&T were forced to borrow $35 billion right now and put it in a trust for lead remediation, it would result in its debt going from roughly $160 billion to $195 billion. Debt to Ebitda -- short for earnings before interest, taxes, depreciation, and amortization -- would rise from a manageable 3.4 times to a more concerning 4.3 times. At a rate of 6%, a little higher than where AT&T bonds yield today, the extra debt might add $2.1 billion in interest expense a year, bringing the total debt service to $8.3 billion annually.

The good news: AT&T is expected to produce $17 billion in free cash flow a year over the next three years, according to Wall Street estimates. Subtract the $2.1 billion in incremental debt services, and the $8 billion in annual dividend payments would consume a manageable 53% of expected free cash flow and 50% of adjusted net income, below the 80% that would be considered a payout is at risk. It wouldn’t be easy, but it looks like AT&T could handle a liability of as much as $40 billion.

“This doesn’t sink the boat on its own, though ... AT&T would have at least five years to do it,” says New Street’s Chaplin. “If they can keep cash flows steady, they can do this without cutting the dividend.”

The same calculations using Chaplin’s numbers for Verizon lead to similar conclusions. Verizon would have to take on roughly $9 billion in debt, leading to an extra $500 million in interest and annual debt service of roughly $4.2 billion. Free cash flow is expected to be almost $19 billion a year for the coming three years. Dividend payments of about $11 billion would consume around 60% of Wall Street’s adjusted average free cash flow projected for the coming few years.

That isn’t to say there aren’t risks. The cost to handle the lead-covered wires could be higher than these estimates. Free-cash-flow estimates could also prove to be too high due to increased competition, something J.P. Morgan’s Cusick fears. Still, free cash has held up during prior ups and downs. At AT&T, free cash flow has covered the dividend in 18 of the past 20 years, with payments consuming roughly half of free cash over that period.

All this is theoretical, and it can be hard -- a bad idea, even -- to argue with the market. Still, AT&T and Verizon stocks are getting close to the point where they look to reflect all the potential losses and then some.

The more they fall, the more attractive they will be.

Write to Al Root at allen.root@dowjones.com

Copyright © 2023 Dow Jones & Company, Inc.

.
.
.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Jon Koplik who wrote (2026)7/22/2023 2:15:59 PM
From: Jon Koplik
   of 2073
 
Barrons / reader comments / re : AT&T and Verizon’s Dividends ...........................................................

Sort by
Newest

Manning Outen
5 minutes ago

I agree, nice dividend and cash flow. Buy V. Lead wire is coating is not in water or friable
Reply
Share
Nick Politakis
37 minutes ago

Both T and VZ are awful investments and the reason is they are in a no growth business that generates a lot of cash. I wish Apple or Microsoft would acquire them both and put the out of their misery.
Reply
Share
Katherine Delorenzo
45 minutes ago

A few points:

This is a problem with a long timeframe toward resolution. Company response aside, the potential for health-related lawsuits, congressional action, etc will likely hang around for a couple of decades. Other companies (JNJ, 3M, etc are useful examples).

A company that has already cut a dividend is generally viewed as more likely to do so again, regardless of reassurance.

Current leadership is still cleaning up the cost of past poor management mistakes.

The stock may look like a good deal for opportunistic investors and a value trap for longs, but those holding at a loss are likely to see it as a TLH candidate before year's end.
Reply
Share
Nils Wessell
2 hours ago

From $43 stock in 1999 to $14 in 2023. What's not to like about T's management.
Reply
2
Share
ANGELO KOKENAKIS
3 hours ago

In 1999 T was a 50 dollar stock. Dead money since 1999.
Reply
Share
George Chimento
16 hours ago

Every basis point of dividend cut will cause the stock to appreciate by much more. Management compensation is tied to stock price and they probably get new grants every year. Repricing by a compliant Board also likely in order to "retain talent." The dividends will be cut. Count on it.
Reply
Share
Gregory McCulley
16 hours ago

My advice after the WSJ article came out was to buy VZ and not eat lead wrapped cable, which I followed.
Reply
1
Share
Nils Wessell
2 hours ago

LOL
Reply
Share
David Walker
19 hours ago

Make sure to remember the analysts cited in the article jumping on board

with no hesitation for an immediate downgrade for both telecoms based on

lead cable liability ..Cusick, Rollins and Heger ... check back how well they

did a year from now... if you have investments with their respective firms .. or

are just curious
Reply
Share
Patrick Frank
2 days ago

Try my math. There are four prominent 8% out there: T, VZ, BTI, MO. Consider them as a group and make equal weight investments in them, as large or as small as you have stomach for. I like the idea of either 1% or .5% of your portfolio. That means either 2% or 4% of your portfolio is drawing over 8%. Consider: 1) all dividends are covered by cash flow. 2) Each board is well aware the market price of their stock is tied to the dividend. 3) there is no immediate risk of cut for any of them.

Riskless risk. Better than a junk bond, because none of them is going to zero.
Reply
12
Share
Timothy Mortimer
2 days ago

I would think that T and VZ mgmt would do everything they could do to spread-out the costs of remediation so that the companies' dividends aren't seriously threatened. Since the companies' dividends are relatively so high, and their growth prospects relatively so low, their mgmt surely understands that the dividends are the primary reason for the market's demand for the stocks -- and, therefore, any serious cut in dividends would really tank the stocks. Therefore, mgmt is surely loath to cut the dividends (...any further than they've already been cut, that is).
Reply
2
Share
George WEHRLIN
2 days ago

If all these Cash flow etc type numbers are so wonderful.... Why was the stock selling so cheap prior to this lead issue??
Reply
1
Share
Timothy Mortimer
2 days ago

Ans: Relatively meager prospective growth in a stock market obsesses with growth?
Reply
1
Share
Philip Reed
2 days ago

This is not nuclear waste, it is very tradable copper and lead. Put a containment sleeve on the ancient cable as it is rolled up and take it to local metal recycle facility.
Reply
5
Share
David Abel
19 July, 2023

AT&T shares having one of their best days in some time.
Reply
1
Share
Stanley Davis
19 July, 2023

Did anyone take into consideration that all of the "toxic lead" in telephone cables would still be leaching into our soil, ground water, rivers and lakes if the lead ore had remained in the ground locations they were taken from?
Reply
3
1
Share
Dan Laramie
19 July, 2023

It's a lead-pipe-cinch that all of those medical ailments will be blamed on the lead. Its not just getting the lead out you're betting on, it's also the health effects that it is accused of. Most of us had mercury, in our teeth, which is well known to cause insanity (how would we know?), just ask the Mad Hatter. But the dentists quietly ground it out, and flushed it down the drain, into the water table. Nobody was held responsible because nobody had deep pockets, like AT&T does. So you're not betting on the health effects, you're betting on what the courts will decide, and if anybody is going to lose, its the one with the most money, who put the cables there in the first place. Here in California we are trying to decide whether to pay the ancestors of the slaves we never had, and we just might. So I wouldn't bet against T paying for the lead poisoning, because they can.
Reply
13
2
Share
Rich Dobson
19 July, 2023

VZ and T already have concerns about growth, due to competition. This is just another thing to worry about. I would want to know first where the growth is going to come from. The competitive landscape is changing and that is a negative for them. I would study it all very closely before going in.
Reply
2
Share
Leonard Pham
19 July, 2023

Another risk could be class action lawsuits. I wonder if the calculations above take into account the potential for future settlements with plaintiffs.
Reply
2
Share
1 reply
Bill Lyerly
19 July, 2023

This might make it harder for these companies to upgrade their networks and offer services in the future?
Reply
3
Share
Henry Kolpin
19 July, 2023

As a former chemical plant employee and purchaser of chemically resistant materials. I can say that every location of the lead shielded cables can be different. The fear of lead leaching into water, soil and air could well be different for every location. As crazy as it sounds lead in Lake Tahoe may be perfectly safe and the lead in the rivers and swamps of the south could be very dangerous due to those variations of conditions, water PH, temperature, etc. etc. and a variation of the lead manufacturers composition of shielding could also be a factor. So right now there is no clear answer.

A complete study and case by case review needs to be done just as ATT says.

Everything could turn out to be perfectly safe, so lets do the science.
Reply
58
1
Share
Frank Anderson
19 hours ago

What is your best "guess?"
Reply
Share
Ernest Montague
19 July, 2023

I agree with doing the science, but "Everything could be safe is a trope." There are problems, how big they are remains to be seen.
Reply
1
Share
Dan H
19 July, 2023

Thank you.
Reply
Share
Edward Winslow
19 July, 2023

Somebody is certainly short both T and VZ.

No doubt someone got wind of this WSJ article prior to publishing and made a fortune by shorting.

At some point the shorts will have to cover.

Maybe it's me, but it sure seems like more often than not Wall Street analysts lower their rating near the stock bottom and increase their rating near the top.

Could part of their compensation be based on stock price performance vis a vie their opinion and rating???

Of course.
Reply
13
Share
MIKE DIMASE
2 days ago

So true, so true! In the last couple of years Barron's recommendations have followed the same path. A stock will get recommended at its 1, 3, and I've even seen 5 year high. Ridiculous!
Reply
Share
Ronald Schipper
19 July, 2023

This is why no one can trust WS
Reply
4
2
Share
Gary Leonard
19 July, 2023

How many stocks are at a 30 year low? T is. The dividend has already been cut.

Why even bother with this stock?
Reply
10
4
Share
Warren Rossenberg
19 July, 2023

From legal point of view, the costs of potential damages caused by the Bell Comp. will share the successor company and the US Government because at that time the lead cables were considered safe.
Reply
13
Share
----------------------------

END.

.
.
.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Jon Koplik who wrote (2027)7/22/2023 2:19:13 PM
From: Jon Koplik
2 Recommendations   of 2073
 
most interesting reader comment ( I thought ) .......................................................................

Henry Kolpin
19 July, 2023

As a former chemical plant employee and purchaser of chemically resistant materials. I can say that every location of the lead shielded cables can be different. The fear of lead leaching into water, soil and air could well be different for every location. As crazy as it sounds lead in Lake Tahoe may be perfectly safe and the lead in the rivers and swamps of the south could be very dangerous due to those variations of conditions, water PH, temperature, etc. etc. and a variation of the lead manufacturers composition of shielding could also be a factor. So right now there is no clear answer.

A complete study and case by case review needs to be done just as ATT says.

Everything could turn out to be perfectly safe, so lets do the science.
Reply
58
1
Share

.
.
.

Share RecommendKeepReplyMark as Last Read


To: Ms. Baby Boomer who wrote (2025)8/9/2023 11:53:48 AM
From: nicewatch
   of 2073
 
Do you think VZ will make a new 52 week low this month or next month? 28s or lower by year end?

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: nicewatch who wrote (2029)8/14/2023 12:21:49 PM
From: Ms. Baby Boomer
   of 2073
 
No ...

I took you off my Ignore List ....

M

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: Ms. Baby Boomer who wrote (2030)8/16/2023 2:55:20 PM
From: nicewatch
   of 2073
 
I guess time will tell. A retest of 52wk lows doesn't seem that silly to me but to get to 28s or lower this year might take a much weaker overall market and some more negative news about leaded pipe removal or whatever the next negative exogenous surprise is. Moreover, by the time it gets there, plenty of stories will pop up about "blue chip" VZ trading at 15-20 year lows. I still think it's a value trap, and not for me but wish you all the best chasing that yield.

Share RecommendKeepReplyMark as Last ReadRead Replies (1)


To: nicewatch who wrote (2031)8/16/2023 3:12:28 PM
From: Ms. Baby Boomer
   of 2073
 
The 28's was MCI ....

M

Share RecommendKeepReplyMark as Last Read


From: Ms. Baby Boomer9/19/2023 3:01:53 PM
   of 2073
 
Mr. Seidenberg ....

M

Share RecommendKeepReplyMark as Last Read
Previous 10 Next 10