Shrugging off Monday weakness, Cummins (CMI 4.19%) stock rebounded this morning and was trading 4.7% higher as of noon ET Tuesday.

The industrial giant posted fourth-quarter and full-year earnings results today. While revenue beat analysts' estimates, its earnings fell short of expectations. Worse yet, Cummins expects its revenue to decline in 2025. Yet something about its outlook has caught investors' attention.

Data centers are boosting Cummins' sales

Cummins' revenue fell 1% year over year to $8.4 billion in the fourth quarter. Yet, the company's bottom line swung sharply to a net profit of $418 million from a loss of $1.4 billion in the year-ago quarter. Of course, Q4 2023 was an exceptionally challenging quarter as Cummins paid a hefty fine to settle a $2 billion lawsuit for installing illegal devices that bypassed emissions tests.

With the lawsuit behind it, the focus is back on Cummins' business and operational performance. Cummins has five business segments: engine, components, distribution, power systems, and Accelera (hydrogen and electric solutions business).

In Q4, while sales from the engines and components segments fell 2% and 17% year over year, respectively, all three of Cummins' remaining segments reported a double-digit growth in sales.

Its components segment, however, took a hit because of the separation of Cummins' filtration business into a stand-alone company, now known as Atmus Filtration Technologies. Overall, most of Cummins' segments reported strong growth, driven primarily by higher demand for power generation products from data centers. That also helped offset weakness in key markets like trucking.

Why Cummins stock could go up

2024 was a significant year for Cummins. It divested its filtration business, launched a new engine for Japan's Isuzu's new medium-duty truck lineup, and launched new products targeting the lucrative data center industry, among other things.

Cummins also launched a new engine platform called HELM providing customers with an option to choose the fuel type, whether diesel, natural gas, or hydrogen. Moreover, Accelera formed a joint venture called Amplify with Paccar and Daimler Trucks and began constructing a factory for battery cells targeting electric commercial vehicles.

Cummins also increased its dividend for the 15th consecutive year in 2024. For 2025, although Cummins expects its revenue to fall by 2% to 3% because of weakness in the North American on-highway truck market, it still expects to boost profitability and cash flows. That's what drove Cummins stock higher today, and could push it further.