Carnival Unveils Seabourn Encore: First of 3 New Ships in '17

Cruise and vacation company Carnival Corporation CCL recently announced the launch of Seabourn Encore -- the first of its three new ships that will come into service in 2017 -- across three of its 10 global cruise brands.

We note that the Seabourn brand is well known for its lavish accommodations, astounding level of service, along with excellent dining and spa facilities.

Similarly, the new vessel also features contemporary interiors, design elements and innovation consistent with Seabourn's standing as the world's finest ultra-luxury cruise line.

The 40,350-gross ton ship is configured with one added deck, extended public areas and a private porch for every suite. Also, Seabourn Encore will uphold the line's high ratio of space per guest, thereby facilitating highly personalized service by its exceptional crew.

Plans Ahead

We note that in 2016, the company introduced new ships Koningsdam, Carnival Vista and AIDAprima, which joined its cruise units Holland America Line, Carnival Cruise Line and AIDA Cruises, respectively.

After the recent launch of Seabourn Encore, Carnival is poised to introduce Majestic Princess from Princess Cruises in April, which will be the world's first cruise ship built specifically for the Chinese market. The 143,000-ton vessel, with capacity for 3,560 guests based on double occupancy will exhibit the elite Princess Class experience augmented with features designed exclusively for the Chinese travelers.

Meanwhile, Carnival’s Germany-based AIDA Cruises brand will launch AIDAperla, one of the world's most environmentally friendly and technologically advanced ships, in July. At 124,500 tons with 1,643 cabins, the ship will feature AIDA's Spray Bar, an exclusive all-white champagne lounge.

In 2018, Carnival plans to launch three new ships from Carnival Cruise Line, Holland America Line and Seabourn. The Carnival Horizon, sister ship of the Carnival Vista, from Carnival Cruise Line is planned for delivery in March. Meanwhile, the Seabourn Ovation from Seabourn and ms Nieuw Statendam, sister ship of ms Koningsdam from Holland America Line are scheduled for delivery in spring 2018 and Nov 2018, respectively.

Rationale Behind

It is to be noted that the launch of Seabourn Encore along with the impending 2017 additions of Majestic Princess and AIDAperla are part of the 17 ships planned for delivery for Carnival and its brands between 2017 and 2022.

With these new launches, the company aims to formulate measured capacity growth over time that allows its global fleet to meet escalating demand for cruise vacations in every region of the world.

In fact, launching new ships is part of the company’s long-term strategy to build state-of-the-art vessels that aids in providing guests with a remarkable vacation experience at an exceptional value. Moreover, along with focusing on newbuilds to stimulate demand creation, Carnival continues to invest in its existing fleets to further enhance guest experiences.

Bottom Line

Carnival’s shares have outperformed the broader Zacks categorized Leisure & Recreation Services industry over the past six months. While the stock gained 17.1%, the broader industry witnessed a gain of 10.2% in the same time period.

However, the company faces stiff competition from the likes of Royal Caribbean Cruises Ltd. RCL and Norwegian Cruise Line Holdings Ltd. NCLH. Moreover, increasing fuel costs, negative currency translation along with macroeconomic issues in key operating regions remain potent headwinds.

Nonetheless, we note that Carnival is the largest leisure travel company in the world, with a portfolio of 10 cruise brands which together operate 102 ships visiting more than 700 ports around the world and adding up to 226,000 lower berths.

Going forward, brand-building efforts, improved consumer spending power, new onboard product offerings coupled with various strategic initiatives are expected to drive onboard yield gains.

Particularly, we believe that given an expected increase in cruise travel throughout 2017, the new ships joining Carnival’s fleet are sure to uplift the currently Zacks Rank #4 (Sell) company.

A better-ranked stock in this sector is SeaWorld Entertainment, Inc. SEAS, which  carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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