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Image source: Altria Group.

Tobacco giant Altria Group (NYSE:MO) gave investors much of what they wanted to see in 2015, with the stock climbing more than 20% on strong business performance. Even with all the attention that the proposed buyout offer for Altria-investment SABMiller received last year, Altria investors want to see the company look back to its core business to fend off the newly invigorated Reynolds American (NYSE:RAI). Altria leads out with its fourth-quarter financial results on Thursday, and shareholders are looking for modest gains in sales and profits. Let's take an early look at what's been happening with Altria Group lately and whether 2016 will be another good year for the tobacco maker.

Stats on Altria Group

Analyst EPS Estimate

$0.68

Change From Year-Ago EPS

3%

Revenue Estimate

$4.74 billion

Change From Year-Ago Revenue

2.7%

Earnings Beats in Past 4 Quarters

2

Data source: Yahoo! Finance.

What's next for Altria earnings?
Investors have been only a little bit nervous about Altria earnings in recent months, cutting their fourth-quarter and full-year 2015 projections by just $0.01 per share. The stock, meanwhile, has been in the doldrums, with almost entirely flat performance since mid-October.

Altria's core business has been doing quite well lately. In its third-quarter report in October, the company said that revenue jumped 4.7%, pushing net income up by about 9% and topping the consensus forecast on the earnings front. Smokeable products were a big winner for Altria, with operating income rising 15% thanks to the smart use of the company's pricing power to make the most of its valuable Marlboro brand name. Cigarette shipment volumes rose slightly for Altria during the quarter, whereas the broader industry suffered volume declines. Solid contributions from the smokeless tobacco and wine segments also bolstered Altria's overall results.

The interesting dynamic that investors will need to look at is how the U.S. tobacco market is shaking out after Reynolds American's completed merger with Lorillard. Together, Reynolds and Altria now control roughly 90% of the U.S. market, and that has largely closed the door to outside competition. Although the two companies individually both want to be the industry leader, both Altria and Reynolds can understand the benefits of duopoly status. Even though major price increases haven't been necessary because of rising volume, both companies have the ability to dictate price effectively, and that could keep Altria profits moving higher in 2016 even if volume performance can't match up to that in previous quarters.

Meanwhile, the ongoing saga of the sale of SABMiller appears to be moving forward smoothly. Buyer Anheuser-Busch InBev successfully raised $46 billion in a near-record-setting bond offering, falling just short of the all-time record of $49 billion raised. The offering will allow the company to pay the cash component of its takeover bid even as Altria expects to take a stake in the beer-maker following the merger in order to keep its position in the beer industry.

In the Altria earnings report, investors will want to be sure they understand what the company is doing with its alternative products segment. Reynolds American has upped the ante with moves to create a next-generation vapor products subsidiary, and its Vuse brand recently released four new brand extensions. Because the long-term trend in cigarette usage has been clearly downward, the potential for new growth in the direction of vapor is important for Altria. Brands like MarkTen and Green Smoke have put Altria in the game, but the next step is to make the most of those efforts and to plot a long-term course toward balancing the need to cater to existing cigarette smokers with the value of embracing a whole new set of potential customers. Altria should address that issue in its earnings report if it wants to be a credible player in the growing industry.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Anheuser-Busch InBev NV. 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.