Verizon Earnings: Lead Uncertainty Overshadows Solid Results

While Verizon Communications delivered solid second-quarter results, investors remain focused on its exposure to lead-sheathed cabling. The firm didn’t provide much additional information or answer questions on the matter, saying it will share details as its own investigation proceeds. We still don’t expect Verizon will face significant lead liabilities, but we have increased our capital spending estimates modestly beyond this year. We suspect Verizon and its peers will ultimately remove some lead-sheathed cabling that otherwise would have remained in place. This change and other adjustments to our forecasts reduce our fair value estimate to $54 per share from $57. We continue to believe the shares are very attractive.