Image source: Philip Morris International.

Investors like stocks that are profit-making machines, and global tobacco stalwart Philip Morris International (NYSE:PM) has reaped the rewards of selling cigarettes and other products to meet worldwide demand. Yet as we've seen with many multinational companies with global exposure, the strong U.S. dollar has hurt revenue and earnings growth recently.

In its third-quarter financial report tomorrow, Philip Morris will almost certainly report steep drops in its sales and net income, and investors would like to see some glimmers of hope that the worst of the downtrend for the company is over. Let's take an early look at what to expect from Philip Morris International and whether it can turn things around.

Taking another dollar hit
The current consensus estimates among investors following Philip Morris suggest that the declines in top- and bottom-line figures will be substantial. Revenue is seen falling almost 14% to $6.76 billion, while earnings of $1.11 per share would represent about a 20% hit from year-ago levels. Philip Morris has brought positive surprises for two quarters in a row, but even delivering an earnings beat the size of the larger of those two quarters wouldn't be enough to catch up to the year-ago quarter's figure.

Investors have grown increasingly cautious about Philip Morris International's prospects over the past few months. They've cut a few cents off their third-quarter projections and a dime from their full-year estimates for 2016, taking some of the air out of the expected rebound in earnings next year compared to projections for 2015 earnings. Yet amid all this uncertainty, the stock has largely stabilized over that period, rising about 4% since mid-July.

Most of those share-price gains came after Philip Morris reported its second-quarter results in July. Despite a 12% drop in revenue, the company managed to grow currency-neutral sales by about 4.5%, and even taking a hit of $0.33 per share due to currency pressures, Philip Morris managed to post a modest gain in net income thanks to an impairment charge in the year-earlier period. Cigarette volumes reversed their trend earlier in the year by falling slightly, but despite weakness in key brands like Marlboro, Parliament, and Chesterfield, Philip Morris performed better than many of its tobacco-producing peers and posted market share gains in key markets like Indonesia, Russia, Brazil, and several countries in Europe.

Since then, several things have happened to affect Philip Morris. The company's Sampoerna unit in Indonesia moved forward with its offering of rights to buy shares, which will have the effect of reducing Philip Morris International's stake in Sampoerna to the 92.5% limit that new regulatory rules governing Indonesian public companies will require early next year. The $1.4 billion rights offering won't have a huge impact on Philip Morris' exposure to the key tobacco market, which has helped support overall results since its acquisition a decade ago.

Competitively, Philip Morris will face new pressures following the Reynolds American (NYSE:RAI) sale of non-U.S. rights to the high-end Natural American Spirit cigarette brand to Japan Tobacco for $5 billion. For Reynolds, growth in international sales hasn't been the highest priority recently, especially as it moves to integrate its recent Lorillard acquisition into the larger post-merger company. Yet Japan Tobacco could aim at building up its market share among younger adult smokers, which is an area in which it has underperformed Philip Morris and some of their competitors in the past.

Competition is also becoming more of an issue outside the traditional cigarette realm. Rival Imperial Tobacco recently criticized Philip Morris International's iQOS heat-not-burn technology, asserting that the reduced-risk product "smells like an ashtray" and making some other disparaging comments. Such infighting among tobacco companies has been uncommon in the past, with most industry players presenting a united front against regulators and other opposition. The recent shift shows just how seriously the industry treats new innovations like electronic cigarettes and heat-not-burn tobacco alternatives.

In the Philip Morris earnings report, you can expect the strong dollar to have its typical downward impact, but be sure to look beyond those figures to see if the company is still growing strongly on a currency-neutral basis. With ongoing attempts from governments worldwide to impose new restrictions on tobacco, Philip Morris needs to stay ahead of the curve to make sure it doesn't fall prey to draconian regulatory efforts that could get in the way of an earnings recovery in 2016.

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.