Miami-based leading cruise company Royal Caribbean Cruises Ltd. (RCL - Analyst Report) recently inked an agreement with STX France to build an Oasis-class ship. The ship, which is scheduled to be delivered in mid-2016, is the third Oasis-class vessel after Oasis of the Seas and Allure of the Seas.
The company did not disclose the exact price of the new vessel, but it has hinted that the price will be moderate.
According to the order, Pullmantur's cruise ship, Atlantic Star, will be delivered to STX France as a part payment. Furthermore, STX France has also offered a one-year option to the company to deliver another Oasis-class ship in 2018 at same price. The contract, which is in line with the company’s previously declared plan in October, is subject to the fulfillment of certain financial terms and conditions.
The company’s Oasis of the Seas and Allure of the Seas, launched in November 2009 and November 2010, respectively, are the biggest cruise ships in the world with 16 decks and they feature 2,700 staterooms. These ships introduced a new era for the cruise vacation industry. Now, with the addition of this vessel under Oasis-brand, the company will be able to further enhance its cruise services and attract more customers.
Including this new order and existing contracts, Royal Caribbean expects its capital expenditures to be $1.3 billion, $700 million, $1.2 billion, $1.2 billion and $1.3 billion in 2012, 2013, 2014, 2015 and 2016, respectively.
Royal Caribbean competes with major cruise companies like Carnival Corporation (CCL - Analyst Report) and Carnival plc (CUK - Analyst Report). Carnival Corporation’s ship Costa Concordia had run aground in mid-January 2012 on the Italian west coast. This disaster had hit the cruise industry in the wake of the ‘wave season’ between January and March.
However, the disturbance seems to have reduced as reflected by Royal Caribbean’s amplified earnings guidance. For full-year 2012, management raised its earnings per share guidance to the range of $1.85—$1.95 from the range of $1.70—$1.80.
Royal Caribbean currently retains a Zacks #3 Rank (a short-term ‘Hold’ rating).