Disney’s Robert Iger might find the second time isn’t quite the charm

The rough exit may have been inevitable after a whopping slump in Disney’s market value following the company’s disastrous fourth-quarter results earlier this month. While the company added more subscribers to its Disney+ streaming service than analysts had expected, the segment also generated a much larger operating loss than it originally projected. Revenue and profits for the company’s theme park division also fell short of estimates, leading the company to a rare miss on both the top and bottom lines.

Mr. Chapek’s oddly cheerful tone on the results conference call in light of the results didn’t help the growing perception that he wasn’t up to the task. Disney’s stock price fell 13% the day after the report — the biggest one-day drop for the long-running Dow component since the first day markets reopened after the September 11, 2001 terrorist attacks. Before Sunday’s news, Disney stock was down 22%. from the day Mr. Chapek was appointed CEO. The S&P 500 gained 34% over the same period. During Mr. Iger’s first term, Disney outperformed the broad index by 213 percentage points.

Mr. Iger has not yet publicly outlined his new plans for the company. However, as someone well-connected in the Hollywood crowd, it seems certain that he will undo at least some of the changes Mr. Chapek made that have proven to be the most controversial in this community. This includes an organizational structure that puts streaming first and takes the ultimate goal of movies and shows out of the hands of the creative teams producing the content.

In a Monday morning report, MoffettNathanson analyst Michael Nathanson noted that Mr. Iger showed a preference for a more decentralized approach during his first tenure as CEO. “We wouldn’t be surprised if he made a similar effort this time,” he wrote. He also upgraded his recommendation for the stock to an outperform rating.

Mr. Iger still has to contend with troubled shareholders. Disney was able to secure a standstill deal with Third Point’s Dan Loeb in September after the activist investor urged the company to cut costs, deleverage and shake up its board. But now his fellow activist Nelson Peltz has emerged, whose Trian Fund Management reportedly recently bought an $800 million stake and is seeking a seat on Disney’s board. Trian has not publicly commented on the latest move, although The Wall Street Journal reported that the activist doesn’t think Mr. Iger should take back control of the company.

But Mr. Iger’s main task – and probably his most difficult – will be to get right what he failed to do before. Succession at Disney has long been a dramatic affair, and Mr. Iger himself lost top candidates in the few years before Mr. Chapek got the job.

Cowen analyst Doug Creutz wrote Monday that the latest move “creates significant instability around the role of Disney CEO.” It’s unique in Hollywood as it involves managing both a massive film and television production business while juggling theme parks, cruise ships and toys.

Mr. Iger did an excellent job the first time, but the 71-year-old’s main task now presents the most unique challenge – making sure Disney doesn’t need him anymore.

Write to Dan Gallagher at [email protected]