Royal Caribbean-STX France Ink MOU For Oasis, Edge Ships

Royal Caribbean Cruises Ltd. (NYSE:RCL) announced the signing of a memorandum of understanding (MOU) with French shipbuilder STX France. Per the deal, STX France will build a fifth Oasis-class ship, which will be delivered in the spring of 2021. The Oasis-class vessels are the world's largest passenger ships.

STX France will also construct additional Edge-class ships, scheduled to be delivered during the fall of 2021 and 2022. Edge-class is the range of ships with a modern and luxurious design scheme, similar to the previous Solstice-class.

The deal is subject to the completion of routine conditions, including documentation and financing. Final contracts, which include the ultimate payment schedules, are expected to be completed within this quarter.

The Oasis-class ships have been gaining popularity with the customers of Royal Caribbean as reflected by the success of Harmony of the Seas. Therefore, management feels that increasing this class of ship will continue to drive the top line.

Although the delivery of the Edge-class vessels is still awaited, the new standard of style Edge-class has generated high interest among cruisers. Meanwhile, the Solstice-class had introduced new designs for vessels and the Edge-class is expected to follow suit.

Royal Caribbean has been seeing strong demand in 2016, with bookings consistently trending above the prior-year levels and outpacing capacity growth by a considerable margin. Royal Caribbean is expecting strong yield trends, going ahead, driven by a significant year-over-year improvement in pricing and the addition of the winter season to the China schedule. Given the consistent increase in bookings, the company is required to increase its capacity. We believe that the increase in capacity will bode well for the company’s top line in the coming years.

Royal Caribbean currently holds a Zacks Rank #2 (Buy). Another favorably ranked stock in the same industry is Vail Resorts Inc. (NYSE:MTN) with the same Zacks Rank as Royal Caribbean. Other stocks in the broader sector which also carry a Zacks Rank #2 are Pool Corp. (NASDAQ:POOL) and Callaway Golf Co. (NYSE:ELY) .