Shares of Verizon Communications and AT&T rose on Tuesday following a sell-off early in the week amid reports that telecom titans would begin testing sites for possible lead contamination.
(ticker: VZ) the stock rose 5.4% on Tuesday as
(T) rose 3.4%, although both stocks later lost some of those gains. The moves come after AT&T marked its lowest close in more than 30 years on Monday, while Verizon fell to its lowest level in 13 years.
Shares tumbled as analysts tried to make sense of the potential financial liability of telecom companies after the Wall Street Journal reported on decades-old lead-sheathed cables. Citigroup analyst Michael Rollins downgraded AT&T stock from Buy to Neutral/High Risk on Monday, following a similar move by JP Morgan.
Verizon is currently testing the various sites mentioned in the Journal article for lead contamination, the company said in an email to Barrons. “We take these concerns about lead-sheathed cables very seriously,” the company said. AT&T also said Barrons he carries out additional tests.
The lead cable sale comes on top of an already difficult year for the industry as the company sees pressure from subscriber growth slow. While social distancing during the pandemic helped boost phone and internet subscribers, penetration is now moderating.
Monday’s price drop may have tempted some bargain hunters to buy the dip and attractive dividend yields could add to the appeal of stocks. AT&T is offering a quarterly dividend of 28 cents, for a dividend yield of 8.2% based on Monday’s closing prices, which is well above the S&P 500 yield of about 1.5%
Additionally, the lead issue is unlikely to be resolved soon, meaning any financial hit to businesses may not show up for years. It took 19 years of litigation for Sherwin-Williams (SHW), Conagra Brands (CAG) and NL Industries (NL) to agree to pay $305 million to settle a lead paint lawsuit.
(HD) was ordered to pay $20.75 million for violating lead safety work practices during home renovations after nearly four years of investigation.
This potentially long delay could be another reason for the improvement in investor sentiment on Tuesday. But it would take more than a day to make a trend.
Write to Karishma Vanjani at firstname.lastname@example.org