Altria: Fake Latin in Real Dutch

The cigarette wars are expected to claim another victim on Wednesday: Philip MorrisMO.

The tobacco giant -- which changed its name to Altria Group earlier this week -- is likely to reiterate that discount imports and an influx of counterfeit cigarettes are hurting its U.S. business, when it reports fourth-quarter results on Wednesday. Analysts are forecasting the company to post earnings of 92 cents a share, compared with 99 cents a share a year ago, according to Thomson Financial/First Call.

"I am sure they will talk about the impact of deep discount," said David Kathman, an analyst at mutual fund research firm Morningstar. "It is a dominant theme for the entire tobacco industry."

On Tuesday, R.J. Reynolds RJR announced a loss of 69 cents a share in its fourth quarter. Over that period, the company said that it was forced to spend heavily on promotions to stop customers from switching to cheaper brands.

RJR said that its promotional efforts rose substantially in the second half of the year, as deep-discount brands grew to almost 10% of total market share in 2002, and 20 states increased excise taxes.

During its fourth quarter, Philip Morris also stepped up its promotional spending. In anticipation, the company warned in September that it would miss previous 2002 earnings growth estimates of 9% to 11%.

For the year, Philip Morris has confirmed its revised earnings growth projections of 3% to 5%. However, the tobacco giant recently backed away from 2003 guidance of 8% to 10% in December. The company's chief financial officer, Dinyar Devitre, blamed cheap and illegal cigarettes.

"People are expecting them to lower guidance on Wednesday. It is pretty much priced into the stock already," said Kathman. "But they are going to listen closely to what the company says."