Image: Debbie Tingzon via Flickr.

When Philip Morris International (PM -0.65%) first went public, investors jumped at the chance to buy the international tobacco giant. Unlike parent Altria (MO -0.92%), which has now been confined to the domestic tobacco market, Philip Morris offered seemingly limitless capacity for growth in a more friendly regulatory environment. Yet the trade-off for international exposure was vulnerability to the currency markets, and as investors prepared for Philip Morris' fourth-quarter financial report on Thursday, the strong dollar will once again play a key role in holding back the company's growth. Let's take an early look at what Philip Morris International will say about the last part of 2015 and whether it sees better times ahead.

Stats on Philip Morris International

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$6.49 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What's ahead for Philip Morris International's earnings?
Investors have remained cautious about Philip Morris International's prospects over the past few months. They've reduced their fourth-quarter projections by 2% to 3%, but the more concerning move is the cut of $0.20 per share from their full-year 2016 predictions. The stock hasn't done much recently, climbing 1% since late October.

Investors have gotten used to seeing big hits from currency impacts at Philip Morris. In its third-quarter results in October, the tobacco company reported a 12% drop in sales and a 10% decline in net income. But taking out the effects of the dollar's strength would have had a huge influence on those financial numbers. On a currency-neutral basis, Philip Morris' revenue would have been $1.4 billion higher, producing a 6% gain for a swing of 18 percentage points. Similarly, the dollar ate away $0.37 per share in earnings, which would have reversed the GAAP loss and resulted in a 16% rise from the previous year's quarter.

Obviously, if the dollar finally starts to behave better, then Philip Morris will stop seeing currency impacts hamper its growth. Investors don't expect the currency onslaught to ease up in the fourth-quarter results that the tobacco company is announcing Thursday, but other multinationals have started to see moderation in the pace of the dollar's gains.

Yet Philip Morris also faces some new challenges. In January, the government in Thailand accused Philip Morris of tax evasion, seeking compensation for what it said was a declaration of the value of imported cigarettes from the Philippines that was too low. Estimates put the potential damages at $2.2 billion, and with the action covering only the 2003 to 2006 tax years, there's the possibility that Philip Morris could face other charges if authorities decide that the alleged activities carried out beyond the original timeframe.

More broadly, Philip Morris has had to deal with a lot of legal action to forestall regulatory efforts against smoking. A number of countries have implemented bans and other measures to try to encourage smokers to quit, and Philip Morris has used a method known as investor-state dispute settlement to try to adjudicate its claims and collect damages. For investors, though, the perceived advantage that Philip Morris had over Altria appears to have disappeared, and in many ways, Altria might well be the safer regulatory bet simply because the U.S. stance on tobacco is already so well-known.

In the Philip Morris earnings report, investors need to focus on the impact of the dollar as well as volume figures from the company's various geographical areas. As long as Philip Morris maintains strong pricing power, then it should be able to hold profits relatively steady in constant-currency terms. Until the dollar stops strengthening, though, Philip Morris earnings will remain under pressure even into 2016.