The United States' most dominant cigarette company reported second-quarter results earlier this week that did little to ease investors' worries amid increasing legislation and anti-smoking campaigns.

Altria (NYSE: MO), most famous for its Marlboro brand that still commands 42.6% of U.S. cigarette share, went up in smoke following its earnings report. Overall profits fell 58%, mostly because of charges related to lease transactions, but plenty of other warning signs littered its earnings report as well.

Altria was able to reaffirm its full-year forecast of $2.01-$2.07 in adjusted earnings, but it cautioned that high unemployment rates and a weak economic environment are likely to affect consumer cigarette-buying habits.

The potentially damaging impact that new warning labels will have on U.S. cigarette manufacturers has investors worried, too. Based on an FDA ruling, Altria, along with U.S. rivals Lorillard (NYSE: LO), Reynolds American (NYSE: RAI), and Vector Group (NYSE: VGR), will have to devote 50% of their packaging to warning labels describing the dangers of smoking by October 2012. In addition, company advertisements will need to devote at least 20% of space to these warning labels. Philip Morris International (NYSE: PM) has successfully integrated these challenges around the globe, but there's no telling what devastating effect this could have on U.S. tobacco companies.

Growth in the company's alternative to traditional tobacco products, smokeless tobacco, slowed to a crawl in the second quarter, with sales up only 4%. Altria still commands the lion's share of the U.S. smokeless-tobacco business, but the door is being left open for Reynolds American to close the gap. Smokeless tobacco makes up just a fraction of these tobacco giants' current revenue streams, but it could be the difference between bridging the gap if anti-smoking regulations continue to be adopted or falling by the wayside.

Even Altria's ability to pass along price increases to consumers can't be seen as a complete victory. It's clear that consumers are hooked enough on Altria's products to pay a premium price, but Altria's seasonally adjusted cigarette volume fell by 4.5%, worse than its previous guidance. The drop is predominantly due to the existence of cheaper alternatives in the form of Pall Mall from Reynolds American and Maverick from Lorillard. The company also sees shipping volume falling even further in the second half of 2011.

Make no mistake: Altria is a portfolio staple among dividend-seeking investors. It's very hard to argue against a company that, as fellow Fool Morgan Housel pointed out just last week, has returned a jaw-dropping 278,000% since the late 1960s if you had held your position and reinvested the dividends. And Fool Matt Koppenheffer has a more upbeat take on the company's future.  Altria's current yield is near the top of its sector at 5.6%, but it has its own set of worries -- namely, that it bears a significantly higher debt load than many of its peers and boasts a payout ratio of 76%, which could curb near-term dividend growth.

But yesterday's quarterly report only convinced me further that Altria's business model is broken. Even at 12 times forward earnings, the company isn't priced attractively enough in my opinion to attract long-term investors, considering the legal ramifications, anti-smoking campaigns, and intense competition surrounding this company. This company's best days may be behind it.

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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.