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AT&T’s stock is on track for first gain in 11 sessions as lead update sparks relief


After failing to close in positive territory for a 10th session in a row Tuesday, AT&T Inc. shares were tracking toward a gain in Wednesday’s premarket activity.

The telecommunications stock was up 4% in premarket trades as recent company commentary suggested to some analysts that AT&T’s
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-0.59%

exposure to lead-clad cables may not be as significant as feared. The company estimates that lead-clad cables represent less than 10% of its copper footprint and that “a very small portion” of these are running underwater.

See more: AT&T to pause prior plans to remove lead cables under Lake Tahoe as it works with regulators

AT&T shares have taken a beating lately after reporting from the Wall Street Journal keyed in on lead-sheathed cables used historically by the telecommunications industry, which the story said posed health risks. (The Wall Street Journal’s, and MarketWatch’s, publisher Dow Jones is a unit of News Corp
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+0.93%
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The stock has gone 10 full trading sessions without notching a gain, factoring in one session of flat performance, and has fallen 16.6% over that 10-session stretch.

Read also: Verizon’s lead ‘overhang’ may limit dividend increases, analyst says in downgrade

The company late Tuesday held an analyst call and released a legal filing that left Oppenheimer’s Timothy Horan with the sense that the company’s exposure to lead cable was less than Wall Street initially expected, meaning potential removal costs could be lower than he had anticipated.

“We think [AT&T] is being conservative, but less than 10% of its footprint ([or about] 200K miles) are lead-sheathed, three-fourths of which are conduits buried underground that should likely just remain in place,” Horan wrote. “Even cables that are not buried can be left for long periods of time when safely sealed up and labeled. We believe a small minority will need to be removed, but expect [AT&T] to give more details on its earnings call next week, sooner than expected.”

He now estimates that the company could incur $2 billion to $20 billion in costs related to its lead-coated-cable exposure, whereas he had thrown out a “best guess” of $5 billion to $50 billion before Tuesday’s updates.

Cowen & Co.’s Gregory Williams was encouraged, as well, by the disclosures AT&T made late Tuesday.

“Naturally, AT&T could not provide definitive conclusions at this time; however the company summarized the data from the court filing and essentially provided a compelling framework around the allegations,” he wrote in a note to clients. “The framework suggests a high conviction that any lead-clad cable exposure will result in very minimal health, environmental, regulatory, and financial risks, if any risk at all, and something we had suspected over the past few days of our own conversations and research.”

Shares of Verizon Communications Inc.
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+2.57%

were up about 4% in Wednesday’s premarket action as well. Oppenheimer’s Horan called it “a more safe and attractive investment given lower lead exposure and wireline revenues.”

Read on: Verizon CEO says the wireless market isn’t such a bad business after all



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