UnitedHealth's

(UNH) - Get Report

reputation may be sullied, but its results continue to shine.

The giant health insurer on Thursday beat Wall Street profit estimates for the third quarter and raised its full-year guidance as well. The company also expressed strong support for incoming CEO Stephen Hemsley -- embraced by Wall Street as the choice replacement for disgraced William McGuire -- and soothed some who feared that Hemsley's days might be numbered in the process.

Citigroup analyst Charles Boorady sounded delighted by the news.

"Buy UNH stock -- even if it gaps up 5% to 10% today," urged Boorady, whose firm has an investment banking relationship with the company. "UNH today is our top stock pick. We target $81 in 12 months."

The stock jumped 5.2% to $50.48 after the company's update.

UnitedHealth did show one sign of weakness. The company's revenue -- while up 55% to $18 billion in the third quarter -- fell shy of the consensus estimate due to membership losses in its lucrative, but highly competitive, commercial division. Still, solid growth in other areas of the company's broad range of businesses, coupled with strong cost controls, pushed earnings above expectations.

UnitedHealth saw profits jump 38% to $1.1 billion in the latest quarter. Earnings per share came in at 79 cents, 3 cents ahead of the consensus estimate. The company now expects higher full-year earnings of $2.95 to $2.97 as a result.

Sheryl Skolnick, senior vice president of CRT Capital, was impressed.

"This report shows us that not even the significant distractions can detract from the fundamental strength of the organization and the business," noted Skolnick, who has a fair-value rating on UnitedHealth shares. This is "a strong quarter from a company 100% focused on making or beating the numbers."

New Focus

These days, of course, UnitedHealth is paying a whole lot more attention to corporate governance as well.

Hemsley made that clear when he opened Thursday's conference call as the future leader of the company. He acknowledged that outside reviewers had been "strongly critical" of the company's past governance practices. He personally apologized, saying he felt "deeply disappointed" by those shortcomings, but promised major improvements ahead.

"Let me assure you that we are thoroughly and swiftly implementing these new measures," Hemsley stated, adding that the company will be "unrelenting in achieving the highest standards for governance and integrity."

Importantly, Hemsley held himself up as the long-term leader who will ensure such changes come about. Easing uncertainty about his future at UnitedHealth -- which had been thrown into doubt by a recent trade newsletter -- Hemsley assured investors that he plans to run the company "for the foreseeable future."

Chairman Richard Burke sounded even more adamant. He said the board had considered Hemsley alone for the top job at UnitedHealth and expected his appointment to be long-term in nature.

Fellow UnitedHealth executive Richard Anderson -- rumored to be the board's favored candidate instead -- likely put any lingering doubts to rest.

"This is the strongest management team in the industry," Anderson declared. And "we are all unanimously and intensely focused in support of Stephen in this transition."

Business Trends

UnitedHealth leaders also offered important assurance about the company's operations. When asked if UnitedHealth had lost any major accounts as a result of the options scandal, Hemsley responded without hesitation.

"None whatsoever," he stated. "Not at this point."

Rather, UnitedHealth said that it has reached out to hundreds of its largest clients -- including AARP -- with reassurance that the company will continue to meet all of their needs. UnitedHealth said that those clients have, in turn, proven "supportive and understanding" about the company's governance overhaul.

Still, UnitedHealth has lost some commercial business due to competitive pressures and its own pricing discipline in the meantime. The company suffered a drop in its fee-based book of business -- where it usually posts gains -- and an even sharper falloff in its risk-based accounts.

"UNH is struggling here," Skolnick wrote on Thursday. "We worry about commercial risk membership trends because it is the highest profit-per-member product line UNH offers."

UnitedHealth stopped well short of promising big gains in this arena next year. Instead, the company maintained its membership growth targets for 2007 and issued future guidance that simply fell in line with current estimates.

"We think leaving the growth rate unchanged is prudent. UNH has a lot to work through," Skolnick said, citing multiple investigations on top of the leadership change. "That's enough for anyone to be cautious."