UPDATE 3-Coventry profit sails by analyst views, shares up

* Q4 EPS 74 cents vs 56-cent Wall St estimate

* Sees FY EPS $2.10-$2.25; Street looks for $2.23

* Shares rise 5.3 percent (Adds context, analyst comment, updates share activity)

NEW YORK, Feb 9 (Reuters) - Coventry Health Care Inc (CVH.N) reported much better-than-expected quarterly profit on Tuesday, helped by improved performance in its Medicare and commercial businesses, sending its shares up more than 5 percent.

The sixth-largest U.S. health insurer by market value also forecast 2010 earnings generally in line with analyst targets.

Fourth-quarter net income rose to $109.1 million, or 74 cents per share, from $88.2 million, or 60 cents per share, a year earlier.

Analysts on average expected 56 cents per share, according to Thomson Reuters I/B/E/S.

Coventry Chief Executive Officer Allen Wise has focused on seven businesses and reorganized management after returning to lead the company last year in the wake of disappointing results and forecasts.

"Slimming down to core business lines and focusing on fundamentals produced a solid quarterly performance," BMO Capital Markets analyst Dave Shove said in a research note.

Coventry's report closes the fourth-quarter reporting season for large U.S. health insurers, most of which posted better-than-expected earnings. Shares of the companies remain volatile based of developments related to healthcare reform efforts in Washington.

Coventry's quarterly revenue rose 15 percent to $3.43 billion. Analysts looked for $3.49 billion. Its total membership stood at 5.27 million at year end, up by about 640,000 from a year ago.

In its commercial plans serving employers, Coventry spent 82.9 percent of premiums on medical costs. That was less than 83.2 percent a year ago, and far below the 84.4 percent expected by analysts at Goldman Sachs. Wall Street watches the barometer closely for indicators of health insurers' profitability.

"As with others this quarter, Coventry's strong fourth-quarter results provide further evidence that industry price discipline has strengthened considerably with potential upside to sector commercial margins in 2010 (or limited downside, at least)," Goldman Sachs analyst Matthew Borsch said in a research note.

Coventry's Medicare Advantage plans for the elderly had 515,000 members at year end, an increase of 135,000 members from a year earlier. It spent 89.4 percent of premiums on medical costs, compared to 90.9 percent a year ago.

Coventry forecast 2010 profit of $2.10 to $2.25 per share. Analysts on average were looking for $2.23.

Coventry shares rose $1.20, or 5.3 percent, to $23.64 in morning trading on the New York Stock Exchange. (Reporting by Lewis Krauskopf; Editing by Lisa Von Ahn, Dave Zimmerman)