Tobacco and food company Altria Group Inc. (MO) Wednesday posted higher quarterly profit as strong international sales of Marlboro and other cigarettes offset weakness at its Kraft Foods Inc. (KFT) business.

Price increases — the result of a reduction in promotional allowances — helped boost profits in its U.S. tobacco business, which also saw market share climb above 50 percent.

The company also said it expected 2005 earnings to be at the high end of its previous forecast, despite a decline in profits and reduction of full-year estimates reported by Kraft Tuesday.

"While Kraft Foods exhibited such weakness in its operating profits last night, the tobacco operations more than made up for this shortfall," Christopher Growe, analyst at A.G. Edwards & Sons, said in a research report. He rates Altria shares "buy."

Altria shares were up 37 cents to $72.85 on the New York Stock Exchange.

The parent of the Phillip Morris (search) tobacco companies and Kraft said profit was $2.88 billion, or $1.38 a share, compared with $2.65 billion, or $1.29 a share, a year earlier.

Excluding one-time items, earnings were $1.37 a share, according to Reuters Estimates. Analysts on average forecast $1.33 a share, though different analysts factor different one-time items into their estimates.

Revenue rose 10.4 percent to $24.96 billion from $22.62 billion a year earlier.

Excluding excise taxes, revenue was $17.31 billion. On that basis, analysts forecast $16.81 billion, according to Reuters Estimates.

The company's Philip Morris USA unit shipped 47.9 billion cigarettes in the quarter, down 0.9 percent from a year earlier. But market share for its top-selling Marlboro brand rose to 40.1 percent from 39.6 percent.

Profit for the unit rose 4.8 percent to $1.2 billion, helped by the lower spending on promotional allowances.

Philip Morris International shipped 217 billion cigarettes, up 9 percent. Profit in that unit rose 19.7 percent to $2.2 billion.

Exposure to the struggling airline industry led to a $121 million loss at the company's financing unit, which took a $200 million provision for losses in that industry.

The company also said it now expects 2005 earnings per share from continuing operations to be $5.05 to $5.10, compared with its earlier forecast of $5.00 to $5.10.

Altria stock gained 14 percent in the third quarter and has extended its all-time high since, boosted by a legal victory for the tobacco industry and expectations that Altria management's plan to split the business into two or three separate companies could be realized as early as next year.

The Dow Jones Industrial Average), of which Altria is a component, was up less than 3 percent in the quarter.

But despite the rally, Altria shares still trade at only about 13.1 times next year's estimated earnings, below the 15.2 percent for the Dow Jones Industrials as a whole. Analysts have said the shares could be worth in the mid-$80 range or more once Kraft is split from the tobacco units, Phillip Morris USA and Philip Morris International.