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Image: Philip Morris International.

Tobacco companies have been profitable for decades, and with its global scope, tobacco giant Philip Morris International (NYSE:PM) has done a lot for investors in its short history as an independent company.

Still, with the tobacco company reporting its second-quarter earnings next week, some investors want to see more definitive signs that Philip Morris can tap into growth trends rather than falling victim to some of the anti-tobacco regulatory moves that several countries across the world have spearheaded recently. Let's take an early look at how Philip Morris International has managed to perform in recent months and whether it can keep up the pace with its earnings.

What investors expect from Philip Morris
Currently, the consensus among those following the stock is for Philip Morris to report dramatic drops in sales and net profit. Analysts expect revenue to drop 14% to $6.7 billion, helping to bring net income down to $1.13 per share, off about 20% from year-ago levels.

Still, with Philip Morris having delivered a positive surprise in its earnings reports in three of the past four quarters, investors have reason to hope that things won't be quite as dire as current projections suggest.

In fact, investors have gotten a bit more optimistic about Philip Morris International's prospects recently. Over the past few months, they've boosted their second-quarter earnings projections by 4%, and they've also lifted their earnings views for the full 2015 and 2016 years by around 3% to 5%. The stock has also recovered a bit of its lost ground, rising 9% since the end of March.

Philip Morris International has shown signs of solid performance even in the midst of dealing with tough conditions in many of its markets as well as a strong dollar. In Q1, Philip Morris saw declines in sales and income, but most of the headwinds came from currency-related effects. Excluding the impact of the strong dollar, Philip Morris produced currency-neutral growth of 9% in revenue and about 24% in earnings, easily outpacing expectations as the company found ways to boost its cigarette-shipment volumes.

Yet Philip Morris still faces plenty of threats. The largest comes from attempts to regulate the overseas cigarette industry further, with a number of countries seeking to impose a restriction on Philip Morris International's ability to use its brand logo marketing on its packaging and instead require plain labeling. So far, tobacco companies have successfully fought such restrictions, but if such laws gain more widespread adoption, it could be hard for Philip Morris to stem the tide and avoid a nasty backlash of reduced business.

At the same time, working overseas puts Philip Morris in direct competition with black-market smugglers. Given the huge tax burdens that many countries put on tobacco, black-market sales of cigarettes and other tobacco products can be immensely lucrative for scofflaws. Tens of billions of cigarettes run through the black market annually in Europe and elsewhere. The cost to taxing authorities is in the billions of euros, and Philip Morris and its international peers also miss out on substantial amounts of revenue from this lost business.

Philip Morris also has had to work hard to comply with general business regulation overseas. For instance, earlier this week, reports surfaced that Philip Morris would sell off a stake in its Indonesian cigarette subsidiary, PT Hanjaya Mandala Sampoerna, later this year. By doing so, Philip Morris will be able to comply with capital controls on Indonesian companies that essentially require parent companies like Philip Morris to allow at least 7.5% of their shares outstanding to trade freely by 2016.

In the Philip Morris earnings report, look for how the company performed in the first three months following its decision last quarter to boost its guidance for the full 2015 year. With investors having celebrated its previous results and upgraded projections so strongly, any shortfall from those high expectations could lead to a quick reversal in the share price.

Yet if the tobacco giant gives investors a positive report this time around, then it should only serve to heighten the appeal that the stock's dividend yield of nearly 5% already gives Philip Morris International's shares.

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.