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(UNH) - Get UnitedHealth Group Incorporated (DE) Report

vital signs just keep getting stronger.

Once again, the giant health insurer has breezed past Wall Street expectations and raised the bar for financial results going forward. The company posted record quarterly profit of 83 cents a share, up 38% from a year ago and 4 cents better than analysts had anticipated. The company also promised to grow 2004 profit by up to 26%, aiming for a range of $3.70 to $3.73 a share; that's well above the current $3.61 consensus estimate.

"This year, 2004, is again going to be very strong," UnitedHealth CEO William McGuire told analysts during a conference call on Thursday. And "we see a 15% growth rate for at least five years."

UnitedHealth's bullish projections -- which clash with some outside forecasts of an industry cycle downturn -- sent the company's stock rocketing 2.3% to a new 52-week high of $59.80. The company has now raised its 2004 guidance two times in as many months.

Still, some on Wall Street question the company's growing optimism. Fulcrum analyst Sheryl Skolnick noted on Thursday that the company is pledging to grow profit even faster than it did last year, when the industry was clearly in an upswing.

"We're a year closer to what people are worried about," Skolnick said of the industry slowdown many are expecting. "Why are you more bullish now than you were then?"

But McGuire downplayed the chances of a negative industry swing, saying that people have been predicting one "every single minute" -- without results -- for years. Moreover, he said that UnitedHealth's diverse portfolio of businesses protects it against shifts in individual units.

"Each of these businesses is a robust business," he said. And "we're going to grow significantly this year across our businesses."

Early Diagnosis

For now, at least, Skolnick isn't terribly surprised by UnitedHealth's strong results.

Indeed, Skolnick urged investors to buy the company's stock weeks ago -- when it was $3 cheaper -- after learning that fourth-quarter results would be released early. UnitedHealth decided to issue unaudited quarterly results instead of waiting for audited numbers slowed down by new accounting rules.

"We believe that, for UNH, bad news could wait, but good news can't wait," Skolnick wrote early this month. "It has been UNH's pattern in the past to offset negative market events with bullish company reports."

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Skolnick went on to predict that UnitedHealth would top fourth-quarter estimates by 3 cents to 6 cents a share and go on to earn $3.75 a share this year. After management increased guidance on Thursday, several other analysts issued 2004 earnings projections in that same ballpark.

Overall, Wall Street found cause for celebration -- and a bit of concern -- in the company's latest update.

Weak Spot

While generally strong, UnitedHealth's performance showed at least one area of weakness.

The company's Uniprise business, which is particularly sensitive to the economy, continues to lose customers. The division, which manages health plans for large employers, shed 65,000 members in the latest quarter and failed to add new customers at the clip Wall Street had expected. Some analysts now worry that the company will fall short of membership growth targets it lowered just two months ago.

"Absent a labor market recovery ... 2004 results to date indicate that

the enrollment range established in November may still be a bit tough to hit," wrote Bear Stearns analyst John Rex, who has an outperform rating on UnitedHealth. "However, we do not believe that the modestly lower net adds we anticipate would impact our earnings outlook."

The company itself isn't worried, either. McGuire conceded that Uniprise additions are "probably a little lower" than he had expected. But he still portrayed the unit as a strong one with plenty of opportunity for growth.

"They have already sold a significant amount of business," he said. "I think we will do just fine."

In the meantime, the company pointed to some key fourth-quarter metrics as clear signs of strength.

Healthy Numbers

During the latest quarter, UnitedHealth grew total revenue by 16% to $7.52 billion. It increased net income by 34% to $507 million. And it raised cash flow by a whopping 35% to $870 million.

Rex was particularly pleased with the final figure, saying that it boosted full-year cash flow well above expectations. Meanwhile, Morgan Stanley analyst Christine Arnold applauded the company's overall results as "not too shabby." And Banc of America analyst Joseph France insisted that the company is already off to a strong 2004.

But UnitedHealth itself downplayed profit opportunities in at least one crucial area. The company stressed that new Medicare increases, tied to reforms in the system, will not drop directly to the bottom line. McGuire pointed out that the hikes are earmarked for specific purposes that improve coverage for senior citizens. And he warned that it's "somewhat irresponsible" to assume that Medicare-related profit will significantly improve as well.

UnitedHealth does foresee new opportunities to grow its Medicare business by signing up -- and keeping -- more customers interested in enhanced coverage. But the company has strong expectations for all of its divisions.

"I see 2004, 2005 and the years beyond as years of great performance," McGuire told analysts on Thursday. "Our shareholders and our customers are going to benefit alike."