In a filing with the Securities and Exchange Commission yesterday, International Business Machines (IBM) reiterated its fiscal 2009 profit outlook of at least $9.70 per share. Management also said that IBM was well on course to deliver earnings of $10 to $11 per share in 2010.

With significant operating leverage, the company expects to continue expanding margins, helped by about $3.5 billion of savings from cost-cutting initiatives in 2009.

Shares of the company rose in early trading hours to $118.18 after closing at $117.46 on Friday on the New York Stock Exchange.

IBM expects to release third-quarter results on Oct. 15. The Zacks Consensus Estimate is pegged at $2.38 a share for the quarter and $9.77 for the full year, exceeding the company’s guidance of $9.70. Zacks estimates assume approximately 13.6% earnings growth and 2.1% sales growth.

IBM is the leader in the Software, Services and Storage business. With a shift to higher-margin software and services, the company raised its 2009 profit objective during the second quarter earnings call from its original forecast of $9.20 due to strong margin performance.

IBM’s second-quarter results beat the Zacks Consensus. Having focused on expense management, the pro forma EPS rose to a record $2.32, up 17.8% from $1.97 in the prior-year quarter. The Zacks Consensus estimate was $2.03 per share.

The server giant competes against Hewlett-Packard (HPQ), Sun Microsystems (JAVA) and Microsoft (MSFT). We maintain our Outperform rating on the stock based on strong fundamentals, substantial free cash flow, strong Services businesses and earnings momentum.

Read the full analyst report on “IBM”
Read the full analyst report on “HPQ”
Read the full analyst report on “JAVA”
Read the full analyst report on “MSFT”
Zacks Investment Research