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is ready to flex its muscles.

The company is poised to take center stage -- and pump out another record quarter -- when it kicks off earnings season for the managed care group on Thursday. Following a string of acquisitions, the company should see quarterly revenue power through the $10 billion mark for the first time ever. Meanwhile, it is set to deliver record profits for the 25th quarter in a row.

Morgan Stanley analyst Christine Arnold predicted last week that UnitedHealth would be "ending the year with a bang."

By now, the company has been a longtime favorite on Wall Street. It regularly posts bulging, double-digit profit growth that blows past expectations. As a result, analysts are banking on another strong performance from the company this time around.

"It is difficult to envision weakness in the quarter," wrote Joshua Raskin of Lehman Brothers, "though we note that the company has historically shown less upside to earnings in the fourth quarter compared to the remainder of the year."

Last quarter, UnitedHealth beat the consensus estimate by 4 cents with profits of $1.04 a share. Raskin expects the company to post fourth-quarter profits of $1.08 a share, up 29% from a year ago, and at least match expectations in the process. Still, he says his latest forecast -- upped by a penny on Monday -- could be as much as 3 cents too low.

Shares of UnitedHealth slipped 43 cents to $89.13 on Tuesday, despite a recent flurry of upbeat reports.

Mostly Sunny

Raskin raises only two potential concerns in his latest research.

He notes that UnitedHealth's top two executives cashed in more than $170 million worth of stock options during the fourth quarter. He also highlights a new regulatory risk.

"Prosecutors are investigating the company's relationship with



over alleged kickbacks," Raskin explains. (

reported on the probes in an article last month.) But "UnitedHealth Group said the company's contract with Medco was the result of 'good-faith, arms-length and often hard-fought negotiations.'"

Mostly, Raskin focuses on the positives. So do his peers. Bear Stearns analyst John Rex considers UnitedHealth's operating fundamentals "among the best in the group." He notes, for example, that UnitedHealth managed to post strong sequential organic enrollment gains for the third quarter. And he expects to see additional, if smaller, gains during the latest period.

Meanwhile, Rex says the company should continue to benefit from stable medical cost trends and merger-related savings. He also applauds the company's "conservative reserve posture." The company routinely enjoys "favorable reserve developments," which led to a $100 million revision in the third quarter alone. Some have raised questions about this regular boost to earnings, however.

A couple of analysts have actually downgraded the company in recent months. But most on Wall Street remain bullish.

Just last week, Merrill Lynch analyst Doug Simpson attempted to push even more investors toward the popular stock.

"Investors looking for larger-cap ideas should continue to focus on UNH," he wrote, "given its earnings visibility, cash-flow generation and overall strong track record."

Like Raskin, Simpson sees the potential for a fourth-quarter upside surprise. He points to margins and share repurchases as "swing factors" that could boost quarterly results. He also says that two developments -- a sluggish flu season and concerns over so-called Cox-2 inhibitors -- may have aided medical cost trends during the recent quarter.

But Simpson is looking for more than a regular quarterly update this week. He wants to know how recent acquisitions might affect the company's performance. Last year, he notes, UnitedHealth "gobbled up" a number of companies, including Oxford and Definity Health, in an effort to further diversify its already broad portfolio.

"UNH could understandably take a little time to digest everything it has acquired over the last year," he says. "Still, given its market position, we are interested in any thoughts on further consolidation down the road."

Some analysts seem particularly interested in UnitedHealth's purchase of Definity. Definity ranks as the industry leader in the fast-growing market for consumer-driven health plans. It already serves 500,000 customers and operates in all 50 states.

"We view the transaction favorably," Arnold wrote, "because, coupled with United's Golden Rule franchise serving individuals and small employers, Definity broadens United's participation in the consumer-driven health market."

UnitedHealth purchased Definity for $300 million during the latest quarter. The acquisition is expected to boost revenue by $100 million this year.

In the meantime, the company is expected to post a 38% jump in revenue -- to $10.4 billion -- for the latest quarter. It should also report strong cash flow even after aggressive stock repurchases.

Of course, the market will be counting on as much. One of the biggest risks to the stock, Simpson says, is "the company's ability to continue delivering on the high expectations of investors."