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UnitedHealth Still Under the Weather

Shares sink after another mixed quarter.

OKLAHOMA CITY --

UnitedHealth

(UNH) - Get Report

has certainly looked stronger.

While the giant health insurer beat quarterly expectations -- an exercise that has become almost routine -- the company has scaled back its goals for the future. Notably, even with help from a big acquisition, the company can no longer promise earnings growth of at least 15%.

But for now, at least, UnitedHealth has brought investors some much-needed relief. The company grew third-quarter profits by 15% to $1.3 billion, with earnings per share of 95 cents beating the consensus estimate by 3 cents. Non-operational gains, particularly share repurchases, helped out. But so did improvements in the company's all-important commercial medical cost ratio, which finally eased after some worrisome upticks earlier this year.

Still, UnitedHealth posted some troubling metrics this time around as well. For starters, revenue -- while up 4% to $18.7 billion -- came in a bit shy, as the company continued to lose lucrative commercial-based business. Even gains in other areas, including the company's booming Medicare business, could not fully offset that erosion.

But UnitedHealth's new 2008 guidance could worry investors most of all.

On the surface, that guidance looks fairly strong. UnitedHealth expects to earn between $3.95 and $4 a share next year, leaving the company room to beat the current $3.95 consensus estimate. But it will need help from a big acquisition and aggressive share repurchases -- neither of which are fully included in current Wall Street targets -- in order to get there. Moreover, those boosts will still leave profit growth short of the company's traditional 15% target.

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Nevertheless, Credit Suisse analyst Gregory Nersessian continues to embrace the stock. He has an outperform rating and a $62 price target on UnitedHealth shares. His firm has investment banking ties to the company.

"Given the company's consistent track record of 15% EPS growth, the 2008 guidance is certainly disappointing," Nersessian admitted on Thursday. Still, "our sense is that expectations had already been ratcheted down for UnitedHealth's '08 outlook and that the current range will likely be viewed as in-line."

The news comes as UnitedHealth shares remain stuck in a year-long range, while shares of rivals such as

Aetna

(AET)

and

Humana

(HUM) - Get Report

have rocketed higher.

On Thursday, UnitedHealth shares fell 38 cents to $48.22.