Faster, more fuel-efficient turbocharged engines are increasingly popular in today's cars. That's potentially great news for Honeywell (NYSE:HON) , the world's largest distributor of turbo systems. The company predicts that by 2018, 40% of vehicles sold will have turbo installed. And if its revenue keeps growing at its current pace, turbocharging could give Honeywell's returns quite a boost by then.

(NYSE:HON)Honeywell has successfully grown its overall revenue for three years in a row:

Year Annual Revenue Increase From Previous Year Share Price Increase From Previous Year
2010 $32.3 billion 5% 38%
2011 $36.5 billion  13% 3%
2012 $37.6 billion 3% 23%

Source: Honeywell Annual Reports;

This consecutive revenue increase can be attributed to the fact that Honeywell has grown and diversified its 20 divisions very fast, now involving itself in all the biggest industries on the market, including turbocharging. 

This year, Honeywell announced second-quarter sales of $9.7 billion, which translates into an EPS of 1.28, again up an impressive 13%. Its North American Turbo Division had almost an impressive 15% increase in sales so far this year.

Turbocharging's effect on revenue
Turbochargers force more air and oxygen into the combustion process. They're often paired with increasingly popular direct injection systems, which nearly every automaker now uses to boost fuel economy.

According to Forbes, turbochargers can also add performance and power to fuel-efficient but often sluggish diesel engines, another area of the auto market gaining rapid momentum.

There are over 700,000 more turbocharged vehicles this year than last year, according to Honeywell. The number of turbocharged cars on the road should reach 3.9 million by the end of the year, according to Honeywell, up from 3.2 million last year. By 2018, 40% of cars, or 6.5 million, will be turbocharged, representing a 2.6 million car increase.

This growth could mean a 67% increase in sales for Honeywell's North American Turbo Division, according to the company's own predictions in its October press release.  And by 2025, 90% of cars will have turbo, as estimated by the Environmental Protection Agency.

If an increase of 2.6 million cars to 40% causes a 67% sales boost, an 8.1 million increase to 90% would proportionally cause Honeywell's turbocharger sales to climb 209% between now and 2025.

Honeywell's Turbo Technologies segment brought in $3.56 billion in sales in 2012, representing 9.4% of the company's total net sales.   A 67% increase would bring turbo division sales to $6 billion by 2018, while a 209% increase would expand Honeywell's turbo sales to $11 billion in 2025.

Any threats to Honeywell?
Among the largest of Honeywell's competitors is Cummins (NYSE:CMI) although its presence in the Turbocharging market is thoroughly surpassed by Honeywell's Turbo Technologies. Cummins Components Segment, the umbrella of its turbocharging division, accounts for 18% of the companies annual revenue, so it does make up a large portion of Cummins as a whole. Its entire Components segment reported 2012 sales of $3.1 billion, which was less than the $3.56 billion that Honeywell's Turbo Division brought in alone.

Seemingly on the bright side, its Components Segment is supposedly increasing its prominence in the market. This year's second quarter, Cummins Components reported sales of $1.1 billion, an 8% increase from last year's second quarter sales. However, the real reason for this is a 21.8% increase in turbocharged cars in the market since last year, not an actual expansion of Cummins Turbo Technologies compared to Honeywell.

In other words, Cummins is not getting a greater share of the turbo market -- it's just fortunate enough to tap into some of the increase in turbocharged cars, while Honeywell picks up the majority of the 21.8%.

So, in reality, Honeywell's competitors are not really close to posing a actual threat to Honeywell's dominance in the Turbo industry. Cummins would have to mount a massive turnaround in order for Honeywell not to still dominate by 2018 and 2025.

Revved-up returns ahead?
Investors have already taken a strong liking to the stock's ongoing optimism. By the start of the third quarter, share prices increased 25.6% since start of this year's first quarter to exceed $80. Analysts predict even stronger earnings for the rest of the year. 

All these prospects, and all its potential, make Honeywell a stock poised for the possibility of powerful returns. 

Drew Stern has no position in any stocks mentioned. The Motley Fool recommends Cummins. The Motley Fool owns shares of Cummins. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.