Philip Morris International Inc. (NYSE:PM), the world’s biggest non-governmental tobacco company, is expected to report a 6 percent fourth-quarter profit increase as bigger margins offset the drag of a strong dollar, higher excise taxes in Europe and lower cigarette sales volumes.

The New York-based company, which reports before the market opens on Thursday, is expected to report net income of $2.2 billion, compared with $2.07 billion in the year-earlier quarter, while earnings per share will increase to $1.35 from a $1.25 over the same period, according to a Thomson Reuters survey of Wall Street analysts. Excluding one-time items, analysts expect earnings per share of $1.37, up 10.2 percent from $1.24 in the fourth quarter of last year.

Revenue is projected to decline 1.3 percent to $7.79 billion to $7.89 billion.

Wall Street expects the company's pre-tax profit margin to increase to 41 percent from 38.3 percent and its net income margin to expand to 28.3 percent from 26.2 percent.

That profit margin expansion offset a variety of obstacles. The U.S. dollar's continuing strength has weighed for several quarters on the company's results. Because Philip Morris reports results in dollars, revenue received overseas must first be converted into dollars. When the dollar rises against other currencies, those currencies purchase fewer dollars, hurting results.

Most of the company's sales are outside the U.S. According to Ted Cooper, a value investor writing for MotleyFool.com, the European Union represents 27.5 percent of the firm's revenue and 31 percent of its operating profit, while Asia accounts for about 35 percent of revenue and operating profit.

The changing economics of the global tobacco industry have also hit Philip Morris in recent years.

According to a note from Citigroup Inc. (NYSE:C) analysts Vivien Azar and Geoff Small, taxation, low-priced competition, changing laws and illicit consumption have affected sale volumes in Philip Morris’ five key markets: the Philippines, Russia, Japan, Indonesia and Turkey. Together those markets account for 40 percent of the company’s sales volume.

The Philippines, Russia and Turkey all charge higher taxes on the firm's brands than on cheaper, local products. Counterfeit cigarettes, as well as a new Russian smoking ban and Japanese pricing regulations, continue to hurt sales.

If results are anything like those of Altria Group Inc. (NYSE:MO), then investors are unlikely to be pleased, said Cooper. While Altria and Philip Morris operate in different geographies, they both distribute the Marlboro brand: Altria distributes the brand in the U.S. while Philip Morris distributes the brand outside the U.S. Altria is seeing an increase in the U.S. distribution of Marlboro, while Philip Morris is seeing a decline in the European distribution, where excise taxes can exceed 70 percent.