Workers at Philip Morris' Indonesian Sampoerna unit. Image source: Philip Morris.

One thing that every investor needs to understand about Philip Morris International (NYSE:PM) is that even though it does business everywhere but the U.S., its financial reporting is done in U.S. dollars. That opens up the international tobacco giant to substantial currency risk, and in recent years, that risk has held back Philip Morris' earnings growth. Lately, though, the trend toward a stronger U.S. dollar has finally started to show signs of slowing and reversing, and that could give investors in Philip Morris International good news on the earnings front going forward. Let's take a look at the specific currencies that Philip Morris has identified as being the biggest drag on results in 2015 and see whether 2016 is treating the company any better.

What currencies hurt Philip Morris last year?

In Philip Morris International's annual report, the company highlighted a number of specific currencies against which the U.S. dollar showed particular strength. In Latin America and Canada, the Canadian dollar, Mexican peso, and Argentine peso were particularly weak against the dollar. In Europe, Philip Morris cited the euro as well as the Russian ruble, Turkish lira, and Ukrainian hryvnia. The Indonesian rupiah and Japanese yen were weak in Asia, and the Australian dollar was also a drag on Philip Morris International's results.

Philip Morris noted that unfavorable currency movements had an impact on its profitability. To the extent that the company brings in revenue denominated in foreign currency but can't tie its costs to the same currency, any resulting profit gets devalued in U.S. dollar terms.

How are Philip Morris' key currencies doing lately?

To see how this year might be different, let's take a closer look at how the currencies that Philip Morris International called out as being important to its overall results have done recently. To do so, I compared the value of foreign currencies now to what they were worth a year ago. That should give investors a sense of what year-over-year comparisons will look like in future earnings reports.

You can see a trend toward less dollar-related strain in several locations across the globe. Asia is the most obvious example of an outright reversal, with the Japanese yen having jumped by roughly 15% from 125 yen to the dollar last year to just 107 yen per dollar now, and the Indonesian rupiah having climbed by about 1% as well. In Europe, the euro has also gained value slightly against the U.S. dollar over the past year, with $1 fetching 88 euro-cents compared to 89 euro-cents at this time in 2015.

In certain other areas, dollar gains haven't disappeared, but they've lessened in magnitude. The Canadian dollar has lost only about 2% against its U.S. counterpart over the past year, and Australia is also roughly in the same range.

That said, the U.S. dollar hasn't lost its stranglehold in some of Philip Morris International's territories. Argentina's currency has lost about a third of its value since mid-2015, and the Mexican peso has weakened from 15.7 to the U.S. dollar to 18.2. Russia, Turkey, and Ukraine have seen declines in their local currencies against the U.S. dollar of between 4% and 18% over the past year.

What moving currencies mean for Philip Morris International

Of course, movements in each currency are only important to the extent that they reflect the revenue that Philip Morris actually generates in the countries that use that currency. For instance, Philip Morris shipped nearly 32 billion cigarettes to Argentina in 2015, compared to less than 10 billion to Canada and 23 billion for Mexico.

Philip Morris' European Union shipments overall climbed to nearly 195 billion. Russia, Turkey, and Ukraine combined showed shipments of 154 billion cigarettes.

In Asia, Indonesia is the most important market for Philip Morris, with 105 billion cigarettes shipped. Japan is a smaller market, with the company coming in with shipments of just over 45 billion in 2015.

When you put these two datasets together, the conclusion you can draw is that the euro's stabilization against the U.S. dollar is one of the most important factors that should help improve Philip Morris earnings over the next year. If other currencies start to follow suit, then the overall impact will be even stronger. In the long run, shareholders can hope that an end to the dollar's strength will lead to improving conditions in all of Philip Morris International's markets and the rise in profitability that will accompany those improvements.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.