SL Green stock could climb if Fed starts cutting rates, Jim Cramer says
"In the short term, SL Green's stock will remain hostage to factors outside of the company's control like the direction of interest rates," he said. "But after this quarter, I really believe that the core business is in good shape, the 5.1% dividend yield is safe, and the stock could be a winner once the Fed starts cutting rates again."
Wall Street didn't react well to SL Green's most recent quarterly earnings. Even though the company, which is a major player in the Manhattan commercial real estate market, beat estimates and raised guidance, the stock still fell and is currently down more than 11% year-to-date.
According to Cramer, some investors believed the quarter wasn't as strong as it seemed on the surface. They attributed the results in large part to a successful investment profit, he said, dismissing the one-time benefit. Analysts were also dissatisfied with "some mixed operating metrics," he said.
But Cramer said he doesn't think it makes sense to write off SL Green's investment profit, because it is part of business. The company's knowledge of the Manhattan real estate market and its ability to "make smart bets on properties in its focus areas" bodes well, he continued. The real estate business can be inherently unpredictable, Cramer indicated, and he said he's not worried that SL Green would have likely reported a miss without the deal.
Cramer said the company's leasing activity appears strong, and he noted that management said there are potential tenants in the pipeline from a variety of sectors. Cramer also remarked SL Green was executing a fair amount of mid-sized deals, saying that this means the company has a "steady deal flow" and isn't relying on the success of a few major contracts.
Cramer added that SL Green's long-term opportunities look promising, aside from the company's attempt to bring a casino to Times Square. He said he doesn't know if SL Green can win that business.
"I'm just talking structural factors here, like the fact that there's minimal new supply of office buildings in New York these days, and SL Green dominates in class A office properties, which remains the strongest part of the market," he said.
SL Green did not immediately respond to request for comment.
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