IBM Poised to Please

A renewed faith in tech stocks has helped propel IBM (IBM Quote) shares this fall, with some believing a turnaround is nigh for the company's critical but beleaguered services business.

IBM, which reports third-quarter earnings after the bell Tuesday, has been an eager participant in the late-summer rally, with shares surging more than 14% since it delivered its second-quarter results. On Monday, the stock added 63 cents to $86.71 on heavier-than-normal volume.

"I think it's a matter of investors finally showing some interest [in IBM] because it had been lagging," says Bill Gorman, a vice president with the equity research staff at PNC Wealth Management, which holds IBM shares. The stock "hadn't done all that much" until this fall.

"Tech has actually done a lot better since [IBM] reported in mid-July," says Standard & Poor's analyst Richard Stice.

Indeed, the mood ahead of Big Blue's last report was, well, blue: "The level of expectation on Wall Street was so low, in my mind, there was only one way to go afterward, and that was up," Bob Djurdjevic, president of Annex Research, who owns shares, observed just after IBM reported its second-quarter earnings, beating estimates by a penny.

For IBM's third quarter, Wall Street analysts are looking for EPS of $1.35 on sales of $22.08 billion. Analysts expect the company to meet those targets, with potential earnings upside.

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