Economic turmoil continues to reduce the number of firms that are able to successfully navigate increasing unemployment rates and plummeting personal wealth. Falling housing and asset prices take a serious bite out of consumers' willingness to spend. According to some polls, the only companies standing tall are those that sell alcohol, candy and cigarettes.

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However, the landscape for "sin stocks" has changed significantly. Miller is now a part of South African-based SABMiller, while Anheuser-Busch (NYSE:BUD) is now a part of Anheuser-Busch InBev (OTC:AHBIF) after being acquired by InBev. In addition, Confectionery giant Wrigley recently left the publicly-traded realm after a generous buyout from privately-held Mars, Inc. (Can your principles make you richer or poorer? Find out if it pays pick your portfolio based on ethics in Socially Responsible Investing Vs. Sin Stocks.)

Plentiful options abound when it comes to smoking, though. Altria Group (NYSE:MO), which owned Miller until 2002 and currently holds a sizable stake in SABMiller, Reynolds American (NYSE:RAI), known best for its Camel brand and Philip Morris (NYSE:PM) are smoking the competition amongst the "sin stocks". The continuous demand for cigars, cigarettes and smokeless tobacco - regardless of the state of the economy - has allowed these stocks to outperform the market (as measured by the S&P 500) over the past few years. Altria's underlying performance has been masked by the sale of businesses and the spinoff of Philip Morris and food-maker Kraft (NYSE:KFT). But Philip Morris has held up well in the difficult economic environment.

Bank On Philip Morris
Shares of Philip Morris have lagged both the market and the shares of the players listed above. Considering it has the brightest growth prospects, this just doesn't make sense. Full-year results released earlier this month demonstrated its potential, with net revenues increasing a steady 6.6% to $25.7 billion, exclusive of currency fluctuations. Operating income grew double digits to $10.4 billion, for an impressive operating margin of 40%. Diluted 2008 earnings rose 16% to $3.32 per share and, although management is calling for 2009 earnings of $2.85 to $3.00 per share, the stronger dollar is projected to dent reported results by 80 cents. Excluding currency impacts, management reckons the bottom line will grow between 10% and 14%. (Find out how to put this important component of equity analysis to work for you in Analyzing Operating Margins.)

Bottom Line
According to Thomson Financial Networks, most analysts expect Philip Morris sales to decline 8.1% to $23.6 billion for the coming year. However, this could change depending on how foreign exchange rates perform throughout the year. The same goes for Reynolds American, as analysts are calling for a 4% drop in sales and a modest 5% fall in earnings. Only Altria is projected to grow sales - by 6.8% for the coming year - but its earnings are expected to drop 4%. Yet, Philip Morris has the best prospects, given its international bias. It estimates that Marlboro is the leading premium cigarette brand in developed and emerging international markets, where it has dominant market share in countries such as Russia, Romania and Mexico. It also has a number of mid- and low-price alternatives to fill in the gaps and sees huge potential in China, where the opening of two production facilities in August will lead to expansion in the region.

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