Pm Cigs Large
Source: Philip Morris International.

Last week, Philip Morris International (NYSE:PM) reported its latest earnings results, and once again, the global tobacco giant felt the hit of a strong dollar and its negative impact on foreign-currency revenue. Yet even as the company sees the damage to earnings lasting throughout the current year, Philip Morris hopes that it can continue making progress at generating growth and taking advantage of some more encouraging trends in some of its key markets. Let's take a look at five things that Chief Financial Officer Jacek Olczak told investors in the Philip Morris conference call last week following the company's earnings release.

"We are revising our 2014 reported diluted EPS guidance to a range of $4.76 to $4.81 compared with the $5.26 in 2013, due predominantly to the impact of unfavorable exchange-rate movement." -- CFO Jacek Olczak

Philip Morris is no stranger to the strength of the U.S. dollar recently, and once again, the company saw a big reduction in its earnings as a result of currency fluctuations. Philip Morris now believes that the strong dollar will account for a $0.72 per share hit to earnings, up by more than a dime from its past estimate.

In particular, CFO Jacek Olczak called out the Indonesian rupiah and the Russian ruble as having substantial impacts on its results. But over longer periods of time, major currencies like the Japanese yen and the euro have weighed on Philip Morris International's results, leading in part to the recent stagnation in its stock price. As long as the dollar continues to strengthen, then you can expect further negative guidance from Philip Morris in the future.

"[W]e're in the final stages of preparing for the pilot launches in Japan and Italy of our heat-not-burn iQOS product platform and Marlboro HeatSticks. These launches will be made without any reduced exposure or reduced-risk claims." -- Olczak

As cigarette volumes have declined in certain key markets, Philip Morris has joined the entire tobacco industry in looking for ways to diversify beyond traditional tobacco products. One key initiative involves its reduced-risk product line, which includes not only electronic cigarettes but also other types of vapor-related products. With its HeatSticks and iQOS kits enabling customers to heat tobacco to produce vapor rather than burning it to produce smoke, Philip Morris hopes to capture its share of this growing market.

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Source: Philip Morris International.

At the same time, though, Philip Morris knows that regulators will watch these new products closely. By being careful about making claims about the new products, Philip Morris hopes to enable free-market dynamics to govern the space as long as possible, and it expects customers will be drawn to its brand superiority and therefore try its products.

"The improved trend in cigarette industry volume is visible across all six of the largest EU region markets by volume, with a particularly strong improvement in the worst-affected markets in Southern Europe." -- Olczak

Europe has been an especially tough market for Philip Morris, with volumes having fallen 3.4% in the EU during the third quarter. Yet Olczak was actually pleased with the number, noting that it represents a big slowing in the rate of decline for volume compared to the 7.9% drop in last year's third quarter. Olczak believes that declines in illegal practices, fewer customers switching to other brands, and slowing moves to e-Vapor products are responsible for those favorable trends. With Philip Morris still owning almost 40% of the European market, the EU is clearly an essential geography for the company's overall success.

"[O]ur board approved a 6.4% increase in our quarterly dividend to an annualized rate of $4 per share. As a result, this year we will exceed our target dividend payout ratio of 65%, reflecting our strong confidence in our business fundamentals and future prospects." -- Olczak

Some investors have worried that the challenges to Philip Morris International's earnings could lead it to stop making aggressive increases in its dividend. Indeed, 2014's increase was far smaller than the double-digit percentage increases that shareholders have seen in past years. Obviously, the threat of outright declines in earnings isn't a good sign for dividend growth.

Nevertheless, dividend investors should take some comfort from the fact that Philip Morris remains committed to raising its payouts even when times are tough. If currency impacts ease, then Philip Morris should once again return to a position of strength going forward.

"Looking ahead to 2015 and 2016, we remain confident that our business fundamentals are improving. ... [W]e target a currency-neutral-adjusted diluted EPS annual growth rate of 8% to 10%." -- Olczak

As long as investors are willing to discount currency fluctuations as random movements, then Philip Morris International's fundamentals look reasonably strong. Pricing power and marketing efforts geared toward growth have Philip Morris poised to take advantage of changing customer preferences, and investors especially hope that new-product launches will drive enthusiasm for the stock.

Admittedly, Philip Morris still has to accomplish many difficult tasks in order to keep all of its operations running as efficiently as possible. Nevertheless, if the dollar stops crushing its results, then Philip Morris should be able to convince investors that it has the potential to keep growing.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.