RGP Slashes Dividend by 50% Amid Tumbling Revenue
The consulting firm's shares held steady as investors weighed a significant EPS beat against a 19% revenue decline and a cautious outlook from its new CEO.
Resources Connection, Inc. (NASDAQ: RGP) announced a drastic 50% cut to its quarterly dividend, a decisive move by its new leadership to preserve capital in the face of sharply declining revenue. The professional services firm’s stock saw a muted reaction, closing up less than 1% at $5.27, as investors digested a complex quarterly report that featured a substantial earnings beat overshadowed by a weak top-line figure and a cautious management tone.
For its second fiscal quarter of 2026, RGP reported adjusted earnings per share of $0.06. The figure sailed past analyst estimates of $0.035 by over 71%, a result that would typically buoy investor sentiment. However, the positive earnings surprise was tempered by revenue that fell short of expectations. The company generated $117.7 million in the quarter, a steep 19.1% decline from the prior year and a miss on the consensus estimate of $120.0 million.
The most significant development was the board's decision to reduce the quarterly cash dividend from $0.14 to $0.07 per share. The move follows the appointment of a new CEO and appears to be a direct response to what the company's leadership described as a "lack of positive momentum" in the business environment. This 50% reduction signals a strategic pivot toward balance sheet fortification amid ongoing macroeconomic uncertainty that has begun to impact client spending in the consulting sector.
In a statement accompanying the results, company leadership pointed to a challenging market that has led to project delays and more cautious spending from clients. The revenue downturn reflects a broader trend in the professional services industry, where firms are grappling with elongated sales cycles and a more discerning corporate clientele tightening budgets.
Before the cut, RGP's dividend yield stood at over 8%, an attractive but potentially unsustainable level given the negative revenue growth. The recalibration of the payout, while a blow to income-focused shareholders, may be interpreted by the market as a prudent and necessary step to ensure financial flexibility. It allows the company to navigate the current downturn without being burdened by a hefty payout commitment.
According to financial data filed with the SEC, the company has faced a difficult year, with its stock trading closer to its 52-week low of $4.07 than its high of $8.38. With a market capitalization of approximately $173 million, RGP is a smaller player in the global consulting landscape, making it potentially more vulnerable to market shifts.
Wall Street remains divided on the company's prospects. Analyst ratings are scattered, including two 'Buy' ratings, one 'Hold', and one 'Strong Sell', underscoring the uncertainty surrounding the firm's trajectory. The average analyst price target of $6.88 suggests that some on the Street believe the stock is undervalued and that the new CEO's cost-control measures could pave the way for a recovery.
Looking ahead, investors will be closely watching for signs of revenue stabilization. The new leadership's ability to navigate the challenging environment and restore top-line growth will be the ultimate test. While the dividend cut provides immediate financial breathing room, the path back to sustainable growth will be the key determinant of RGP's long-term value.