Smith & Wesson declines on stock offering news

The stock slid 53 cents, or 8.6 percent, to $5.64.

Springfield, Mass.-based Smith & Wesson said it plans to use proceeds from the public offering of 6.3 million shares, which is expected to close Friday, to pay down debt.

As of Jan. 31, the company had about $120 million in notes payable.

Wedbush Morgan Securities analyst Rommel Dionisio said the offering will dilute earnings, and cut his fiscal 2009 earnings estimate to 37 cents per share from 39 cents per share.

Analysts polled by Thomson Financial expect earnings of 36 cents per share for the period, on average.

Dionisio kept a "Buy" rating, and raised his price target to $7 from $6, implying he expects the stock to rise about 14 percent over Monday's $6.17 close.

"Despite near-term challenges such as bloated retailer inventories, competitive promotional activity, and a sluggish overall retail environment, we continue to believe Smith & Wesson's continued market share expansion and long-term growth story remains intact," Dionisio said in a note to clients.

D.A. Davidson analyst Reed Anderson cut his fiscal 2009 earnings estimate to 29 cents per share from 31 cents per share. He kept a "Neutral" rating and $6 price target.

"We continue to believe our estimates are somewhat fluid based on the difficult macroeconomic environment as well as challenging conditions in the firearms industry where inventory levels still appear high to us," Anderson said in a note stock.