Lehman Brothers on Tuesday raised its investment rating on Electronic Data Systems to overweight from equal weight after noting the technology outsourcer's success in signing new contracts and its commitment to cost cutting.

In a research report, Lehman analyst Alan Hellawell noted that EDS plans to reduce overall headcount by 5,000 this year while increasing hiring "in lower cost geographies such as India, China, and Eastern Europe."

Earlier this month, EDS reported that third-quarter contract signings increased 28% year-over-year while net income climbed 83% to $128 million. Lehman on Tuesday set a target price on EDS's stock of $32. It's currently trading just over $27.