Wall Street remains addicted to Philip Morris . The tobacco giant has not resolved its legal woes, but it keeps piling up the profits, and investors can expect more of the same when it reports its second-quarter earnings tomorrow.

Philip Morris was the best-performing Dow Jones Industrial Average component last year, and so far this year, it is again outperforming many of its blue-chip peers. Yet its trailing price-to-earnings multiple remains under 12, held down by litigation concerns that continue to hang over the maker of Marlboro and other leading cigarette brands. Only last month, a Los Angeles jury awarded one longtime Marlboro smoker a whopping $3 billion in punitive damages. That sort of headline tends to weigh on a stock, despite the cheerleading of many Wall Street analysts. Forget about that $3 billion judgment, many analysts say: Philip Morris will cut it down to size on appeal. Just last week, Morgan Stanley's David Adelman reinstated coverage of Philip Morris with a "strong buy" and a $65 price target. The stock was trading near $45 today, so Adelman expects about a 50% gain over the next 12 months. "We continue to strongly believe that the U.S. tobacco industry's aggregate legal risk profile has significantly improved over the last several years, and that the industry's legal risk will continue to secularly decline over the next several years," he told his clients in a research note. Meanwhile, Philip Morris and its majority-owned Kraft Food subsidiary continue to sell an awful lot of cigarettes, crackers and beer. (Philip Morris took Kraft public last month but retains about 84% of the stock.) Philip Morris is expected to post underlying earnings of $1.03 per share tomorrow, up strongly from the 95 cents it racked up for the year-ago quarter. Nobody expects a negative surprise from the second-quarter results, but some are concerned that Philip Morris may have trouble meeting full-year expectations of profit growth in the range of 9% to 11%. Davenport & Co. analyst Ann Gurkin says the firm may be forced to boost its promotion effort to match similar spending by rival R.J. Reynolds Tobacco . And the dollar's strength versus foreign currencies continues to be a problem for Morris, a global sales powerhouse. "The euro in particular has weakened further since the end of the first quarter," Gurkin notes. "Twenty-two percent of their profit comes from Western Europe." Still, she rates Morris an "accumulate," mostly because the stock's valuation "is still very compelling." So long as Morris continues to pile up the profits, Wall Street will continue to shrug off the litigation threat and call for a higher multiple for this stock.

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