Royal Caribbean Cruises Ltd.
) ship 'Grandeur of the Seas' met with an accident recently,
following the footsteps of another cruise operator,
Royal Caribbean's ship Grandeur of the Seas caught fire on May
27, 2013. There was no casualty in the disaster. Royal
Caribbean - the world's second largest cruise operator - assured
a refund to the passengers booked for the May 31 sailing along
with the transportation expenses incurred. The ill-fated ship is
expected to resume services on Jul 12, 2013.
The cruise industry does maximum business in the summer season.
Hence, the timing of the catastrophe took a severe toll on Royal
Caribbean. Prior to this incident, Royal Caribbean was
anticipating its second quarter 2013 earnings to range between 10
- 15 cents per share. For fiscal 2013, management expected
earnings per share in the range of $2.30-$2.50 per share. Royal
Caribbean expects the latest fire disaster to cost around 10
cents per share.
In the recent times, the cruise industry has been reeling under
pressure mainly due to a series of accidents that took place on
the industry's key player Carnival's ships. The grounding
of its ship Costa Concordia last January in Italy, the fire at
its Triumph cruise ship carrying around 3,000 passengers in early
February this year and the equipment problems at Carnival Dream
in the Caribbean had industry-wide repercussions.
These tragedies can shatter passenger confidence in the industry
especially that of first time cruisers and result in subdued
bookings. However, the latest accident was the first setback
suffered by Royal Caribbean, of late, and was much smaller in
scale than the ones suffered by Carnival.
Royal Caribbean currently retains a Zacks Rank #3 (Hold).
Further, despite uncertain economic conditions in Europe, Royal
Caribbean is witnessing strong demand in the region in 2013. The
U.S. market is also showing healthy signs in terms of bookings.
These positive attributes make Royal Caribbean a better-placed
company in the industry.
Some companies from the leisure and recreational services
industry that are worth a look include
The Madison Square Garden Company
Regal Entertainment Group
) both carrying Zacks Rank #2 (Buy).
CARNIVAL CORP (CCL): Free Stock Analysis
MADISON SQUARE (MSG): Free Stock Analysis
ROYAL CARIBBEAN (RCL): Free Stock Analysis
REGAL ENTMNT GP (RGC): Free Stock Analysis
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