When your customers are suffering, you suffer with them. Cummins (NYSE:CMI) has had to deal with that dynamic for a long time, as the companies in the energy, mining, trucking, and construction markets that are the primary purchasers of its engines have struggled under tough industry conditions. Lately, those industries have shown signs of a recovery, and that has raised hopes that Cummins would recover more sharply as well.

Coming into Tuesday's third-quarter financial report, Cummins investors were optimistic that the engine maker would be able to take advantage of improving prospects for its primary customers. Cummins' results reflected rising demand in several key areas, and the company seems more optimistic than ever that it can accelerate its growth from here. Let's take a closer look at Cummins and whether its future is as bright as it seems to be.

Cummins turbo-diesel engine in red with the Cummins logo on it.

Image source: Cummins.

Cummins revs up its engines

Cummins' third-quarter results showed the extent of the recovery in the industrial segments that it serves. Revenue jumped 26% to $5.29 billion, beating the consensus forecast among those following the stock by an impressive $500 million. Net income jumped by more than half to $453 million, and the resulting $2.71 per share in earnings was well above the $2.47 per share that most investors had expected to see.

Cummins got balanced contributions across its geographical footprint. North American sales rose by a quarter, with the company citing the truck, oil and gas, and construction markets for its strength. Internationally, Cummins boosted its top line by 28%, with China and India performing well and with the company getting more demand from its mining customers.

Good performance among Cummins' different businesses was also encouraging. The engine division boosted segment revenue by 26%, led higher by off-highway revenues on demand from trucking and construction customers. The distribution segment posted 12% organic growth and also gained from strategic acquisitions. Component sales were up by a third, with particularly strong performance in China and India. In the power systems division, demand from mining and energy customers was the primary contributor to 23% sales growth. From a profitability standpoint, engines led the way higher, with pretax segment earnings more than doubling from year-ago levels. Solid gains in components and systems offset weaker performance in the distribution segment.

Can Cummins keep picking up speed?

CEO Tom Linebarger couldn't have been happier about the way that the engine maker performed. "Cummins experienced positive momentum in demand in a number of important markets," Linebarger said, "resulting in strong sales growth in the third quarter." The CEO cited both stronger volume figures and operational improvements in driving results higher.

Once again, Cummins was able to boost its guidance for full-year 2017 sales. The engine maker now believes that its top line will grow 14% to 15%, up from a much lower 9% to 11% range three months ago. Cummins also said that its new Eaton Cummins Automated Transmission Technologies joint venture would have a slight downward impact on pretax earnings, and that led the company to narrow its profit margin guidance to the lower portion of its previous range, between 11.8% and 12.2%.

Cummins investors seemed generally comfortable with the report, and the stock was up about 1% in pre-market trading immediately following the announcement. Investors will want to see more follow-through from Cummins, especially given that some key moves to spur infrastructure and construction spending from the U.S. government haven't yet gotten implemented. After waiting for a long time for a cyclical upswing to help the business thrive, shareholders in Cummins now want to see this rebound continue for a long, long time.

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