IBM Bringing Its A-Game

(Updates stock price)

ARMONK, N.Y. (TheStreet) -- IBM's(IBM Quote) third-quarter results are expected to provide yet more evidence of the firm's recession-busting credentials.

The tech bellwether posts its results after the market closes Thursday, and investors will be keen to see whether the company continues its margin expansion.

IBM has been one of the success stories of the economic downturn, pushing margins up at a time of tight IT budgets. The company's operating margin, for example, is expected to grow to 18.5% in 2009 from 16.1% last year thanks to its software and services divisions.

The company is also expected to widen its profit. Analysts surveyed by Thomson Reuters are expecting third-quarter revenue of $23.38 billion and earnings of $2.38 a share, compared to sales of $25.3 billion and earnings of $2.04 a share in the same period last year.

IBM also reconfirmed its profit forecast for 2009 and 2010 recently, which followed strong quarterly numbers. In its second-quarter results, IBM boosted its pre-tax margin by four points, its biggest margin improvement since it sold off its PC business to Lenovo in 2005. Despite seeing revenue dip 3% year over year, the firm also expanded its gross margin by two points.

"We expect IBM's financial performance for the September '09 quarter will be similar to that of the recent past," wrote Brian Marshall, an analyst at Broadpoint AmTech, in a note earlier this week. "In other words, we expect solid performance on the bottom-line driven by lower headcount (especially on the IT service side), tight cost controls and a focus on strategic revenue."