The market seems to be taking a wait-and-see approach to Altria (NYSE:MO) as it heads into earnings next week. The stock is down 14% over the past year, compared with a better than 5% gain for the S&P 500, and though the cigarette maker has bounced well off its lows, Altria's shares have been slowly sliding over the last few months.

Investors may be wanting to see how sharply cigarette sales will slide when Altria reports its second-quarter results on Tuesday, July 30. The industry has fallen faster over the past few years, and the tobacco giant has already enacted two price increases this year, indicating it may take a rare third price increase (or more) later on.

IQOS heated tobacco device

Image source: Philip Morris International.

With Juul Labs under pressure from regulators, Altria's investment in the electronic cigarette leader is threatened. Other investments, such as buying into marijuana grower Cronos Group and its acquisition of Burger Sohne and its oral nicotine pouches, are either long-term plays or hedges against its traditional cigarette business.

There may be good reason to wait for Altria's earnings report before making a move, but though there is a wariness surrounding the Marlboro brand owner, there also remains much to be hopeful for.

A special hold on users

Few businesses have the pricing power the tobacco industry possesses because of the addictive effects of nicotine on users. While Altria and other cigarette companies do lose smokers whenever they raise prices, whether it's on their own such as Altria's last hike, or in response to tax increases on cigarettes by the government, most smokers continue buying their product.

That gives the tobacco companies special leverage to maintain their profits in the face of a secular decline in their business. While billions of cigarettes are shipped out every year, someday that will come to an end, though investors needn't worry it will be any time soon.

That suggests that although Altria's most recent price increase indicates another dramatic slide in smoking rates, it also means its bottom line won't be particularly affected.

Lighting up the e-cig market

A declining user base is also why Altria has invested in smoking alternatives, whether it's electronic cigarettes or smokeless tobacco alternatives, such as snus. While the U.S. is the most advanced market for the former, and Altria's $12.8 billion investment in Juul gave it a 35% stake in the business that has a better than 70% share of the market, the payoff for the e-cig maker may just be in global expansion, not the United States.

Juul is only in the early stages of entering international markets and is currently sold in Canada, the U.K., France, Spain, Ireland, Germany, Italy, Austria, and Russia. It has big plans to expand into the Asia-Pacific region. The real benefit for Altria will be when Juul ramps up its global ambitions.

Perhaps equally important for Altria is the approval Philip Morris International (NYSE:PM) received from the Food and Drug Administration to sell its heated-tobacco IQOS device in the U.S. Altria will be the one marketing and distributing the device that will be sold under its Marlboro brand as HeatSticks. Though it will initially launch in the Atlanta area before rolling out nationally, because Juul is under pressure and there are new FDA regulations coming into effect, Altria through IQOS could have the electronic cigarette market all to itself or be one of just a select few with devices that are available.

A smoke-free future

Altria investments in other smokeless tobacco products can also help offset whatever declines it experiences in cigarettes. It owns industry-leading brands such as Copenhagen and Skoal, and it just acquired the on! brand of snus when it bought Burger Sohne. Not to be forgotten are its 10% ownership stake in Anheuser-Busch InBev, which just reported surprisingly strong earnings of its own, and the Ste. Michelle winery.

These backstops have helped Altria diversify and are why analysts, despite expected declines in the cigarette market, estimate second-quarter revenue will actually be growing 3.5% to $5 billion and earnings will expand 9% to $1.10 per share.

Although Altria's core business is shrinking, it's overall revenue may grow during Q2. In addition, though the market seems hesitant, the cigarette giant may surprise everyone yet.