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Carnival Takes Over Port & Railroad to Gain Edge in Alaska

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Carnival Corporation & plc (CCL - Free Report) announced that its subsidiary, Holland America Princess Alaska Tours, has arrived at an agreement to acquire TWC Enterprises Limited's White Pass & Yukon Route (WP&YR) division. WP&YR comprises White Pass' port, railroad and retail operations in Skagway, AK. Subject to customary conditions, the transaction is slated to close on Jul 31.

Along with the merger agreement, Holland America Princess Alaska Tours also implemented a memorandum of understanding (MOU) with Survey Point Holdings, Inc. Under the MOU, Survey Point will be jointly managing the acquired division. The agreement is finalized on the condition that Survey Point and its affiliate will own a majority stake in the company while Carnival will retain a minority position.

Strategic Initiatives to Capitalize on Opportunities in Alaska

The move underscores Carnival’s strategic initiatives to market itself and enhance its booking environment in Alaska. By keeping the Skagway port locally owned and independently operated, the company remains committed to the continued development in Alaska, which is already a popular tourism destination. By making investments in Skagway and the surrounding regions, Carnival aims to accelerate economic development and job growth, which will have a positive impact on the local economy and further benefit the Alaska tourism industry.

Meanwhile, the company believes that it is well positioned for continued earnings growth, given the current strength in its bookings, particularly in Caribbea, Alaska, Europe, Asia and Australia, along with pricing trends for 2018. In fact, management noted that since November, booking volumes for 2018 have been better than the last year at relatively higher prices. Moreover, cumulative bookings for 2018 are still well ahead of the prior year on both press and occupancy at this point of time. It thus expects revenue yields (in constant dollars) to continue improving in fiscal 2018, backed by marketing initiatives and a better booking environment.

Share Price Movement

The company’s shares have lost 8.1% in the past six months, outperforming the industry’s decline of 8.7%. However, we believe that strategic initiatives to expand the cruise’s capacity by upgrading current ships, increasing the fleet and attracting greater number of leisure travelers will help the stock to gain in the near term.


Zacks Rank & Stocks to Consider

Currently, Carnival carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the leisure space include Lindblad Expeditions (LIND - Free Report) , Six Flags Entertainment (SIX - Free Report) and RCI Hospitality (RICK - Free Report) . While Lindblad and Six Flags sport a Zacks Rank #1 (Strong Buy), RCI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lindblad, Six Flags and RCI’s earnings for 2018 are expected to grow 155.6%, 33.8% and 52.5%, respectively.

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