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EDS Back on Track

After several years of struggle, Electronic Data Systems (EDS) appears to have turned a corner.

Shares in the Plano, Texas-based IT services giant recently broke through peaks set a year ago, as investors are gaining confidence that the company has started to focus on clearing the way to further growth.

"The company has gotten through a number of problems, and they've gotten their house in order," says Standard & Poor's equity analyst Dylan Cathers. "They've finished restructuring, steadily increased their offshore capabilities, and their balance sheet is in shape."

EDS set a recent 52-week high last month following a meeting with analysts that sparked an upgrade by RBC Capital's Cynthia Houlton.

"Our rating change and higher price target reflect a shift by the company to growth for the first time since 2002," Houlton wrote. She raised her price target to $33 from $26. Her firm has provided EDS with nonsecurities services in the past 12 months.

On Tuesday, EDS closed up 1.5% to $27.78 after pulling back nearly 7% from its 52-week high of $29.94.

In its latest quarter , EDS beat the Street's forecast on the top and bottom lines and nearly doubled its profit over the comparable period in 2005. Signings hit $7.6 billion for the quarter vs. $5.3 billion in the same period last year.
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