Carnival Corporation & plc CCL entered into a memo of agreement with Italian shipbuilder, Fincantieri S.p.A., to build four cruise ships. The final contracts are expected to be executed in 2016. Including the latest agreement, Carnival Corporation has to deliver 17 ships between 2016 and 2020.
While two ships will be built under the brand Costa Cruises Asia for deployment in China, the other two will be built for the brands, P&O Cruises Australia and Princess Cruises. All four ships will be built by one of the leading cruise ship-building companies, Fincantieri, at its shipyards in Monfalcone and Marghera, Italy. The ships are expected to be delivered in 2019 and 2020.
Costa Cruises Asia’s new ship will feature Italian-style hospitality, entertainment and culinary experience. The Costa Cruises ships are expected to strengthen the brand’s presence in China. Lately, Carnival has adopted a strategy to grow beyond its familiar itineraries and capitalize on the fast growing Asian market. It expects the Asian market for cruises to continue to grow significantly on the back of an increasingly consumer-driven economy.
The ship built by Princess Cruises' – the fourth "Royal Princess" class vessel – will feature the design platform used on other Princess cruises, like Royal Princess, Regal Princess and Majestic Princess. This ship is expected to be delivered in 2017.
Carnival’s leadership position provides the scope to expand its capacity – by upgrading the current ships and increasing the size of its fleet – on the back of higher cash from operations and a comparatively lower debt burden. Moreover, Carnival's capacity growth allows it to maintain its market share without putting pressure on pricing.
Carnival is especially optimistic about the growth prospects of the Japanese and Australian markets. These countries boast a rapidly developing cruise market with passenger numbers soaring over the past few years and expected to rise further. A growing middle class, with high disposable income, makes these markets even more attractive for Carnival. Furthermore, an increasing number of ports and tourist destinations in Asia present tremendous growth opportunity for the cruise industry.
Carnival currently carries a Zacks Rank #2 (Buy).
Other well-ranked stocks in the same sector are Vail Resorts Inc. MTN, The Madison Square Garden Company MSG and Royal Caribbean Cruises Ltd. RCL. While Vail Resorts sports a Zacks Rank #1 (Strong Buy), The Madison Square Garden Company (MSG) and Royal Caribbean Cruises hold a Zacks Rank #2.
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